Document:

<PAGE>

                                                                    EXHIBIT 10.4

                       AMENDED AND RESTATED LOAN AGREEMENT

        THIS AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement") is dated and
entered into as of June 20, 2000, by and between FARO Technologies, Inc., a
Florida corporation ("Lender"), whose current mailing address is 125 Technology
Park, Lake Mary, Florida 32746, and Wendelin Karl Johannes Scharbach, an
individual resident of the Federal Republic of Germany ("Borrower"), whose
current mailing address is Schwarzwaldstrasse 94, 68163 Mannheim, Germany.

        WHEREAS, on May 15, 1998, Lender acquired CATS computer aided
technologies, Computeranwendungen in der Fertigungssteuerung GmbH, a limited
liability company under the laws of the Federal Republic of Germany ("CATS").
Borrower was a holder of Quotas in CATS.

        WHEREAS, pursuant to a Loan Agreement dated August 2, 1999 between
Lender and Borrower (the "Original Loan Agreement"), Lender has agreed to loan
to Borrower an amount equal to his tax obligation to the German tax authority in
connection with the acquisition of CATS. The maximum amount of the loans is
estimated to be approximately $2 million.

        WHEREAS, the German tax authority have indicated to Borrower that they
would be willing to issue a preliminary tax assessment for fiscal year 1998
based on a value of U.S. $4.875 per share of Common Stock of Lender (using an
exchange rate of U.S. Dollars to Deutsche Marks ("DM") of 1:1.8403 for May
1999).

        WHEREAS, Borrower received 458,334 shares of Lender common stock as part
of the purchase price for the acquisition of CATS. Using a price of $4.875 per
share of Lender common stock, the value of the shares of Lender common stock
received by Borrower would equal DM 4,111,926. The tax payable with respect to
such shares based on such value would equal DM 1,154,400.14.

        WHEREAS, based on a stock price per share of Lender common stock on May
15, 1998 of U.S. $11.125. the value of the shares of Lender common stock
received by Borrower would equal would equal DM 9,048,634 (using an exchange
rate of U.S. Dollars to DM of 1:1.7746 for May 1998). The tax payable with
respect to such shares based on such value would equal DM 2,540,854.82.

        WHEREAS, because the tax assessment received by Borrower is only
preliminary, the German tax authority could at any time revise the tax
assessment based on the price per share of Lender common stock on May 15, 1998.

        WHEREAS, the parties wish to amend the Original Loan Agreement to
provide that Lender will loan to Borrower an initial amount of DM 1,154,400.14
resulting from the preliminary tax assessment as provided for in the Original
Loan Agreement, and that Lender will pay an additional amount of DM 1,386,454.68
(DM 2,540,854.82 less DM 1,154,400.14) into an escrow account to cover possible
additional taxes payable because of a higher value of the 458,334 shares of
Lender common stock issued to Borrower in connection with the acquisition of

<PAGE>
                                                                 EXHIBIT 10.4

CATS. The amount paid into escrow would increase the amount of the Loan under
this Agreement if distributed to pay additional taxes.

        WHEREAS, once the German tax authority have issued a final tax
assessment, the amount in the escrow account will be used to pay such amount of
additional tax or, to the extent the amount in the escrow account is not needed
to pay additional taxes, will be repaid to Lender. To the extent the amount in
the escrow account is used to pay additional taxes, such amount would be
evidenced by a new promissory note issued by Borrower to Lender and such note
would be secured by shares of common stock of Lender.

        WHEREAS, this Agreement amends and restates the Original Loan Agreement.

        In consideration of the loan described below and the mutual covenants
and agreements contained herein, Borrower and Lender agree as follows:

        1.      LOANS.

                A.      Initial Loan.

                i.      Lender hereby agrees to make a loan to Borrower in the
                principal amount of DM 1,154,400.14 (the "Initial Loan").

                ii.     The amount of the Initial Loan is equal to the tax
                payable by Borrower (based on the preliminary tax assessment
                issued to Borrower by the German tax authority for fiscal year
                1998, which used a value of U.S. $4.875 per share of Lender
                common stock, and based on an exchange rate of U.S. Dollars to
                DM of 1:1.8403 for May 1999) with respect to Borrower's receipt
                of 458,334 shares of Lender common stock in connection with
                Lender's acquisition of CATS.

                iii.    To evidence his obligation to repay the Initial Loan,
                and to otherwise induce Lender to make the Initial Loan,
                Borrower shall execute and deliver to Lender a Promissory Note,
                Stock Pledge Agreement, Affidavit and Indemnity Agreement, Stock
                Power and UCC-1 Financing Statement in the forms attached hereto
                a Exhibits A, B, C, D and E, respectively (together, the "Loan
                Documents") with respect to the Initial Loan at such time that
                the Initial Loan is made.

                iv.     Lender will be obligated to make the Initial Loan to
                Borrower within three (3) business days after Borrower presents
                written evidence to Lender that the German tax authority has
                requested payment of the tax obligations described in Section 4
                of this Agreement.

                B.      Additional Loan.

                i.      Lender hereby agrees to make an additional loan to
                Borrower in the principal amount of up to DM 1,386,454.68 (the
                "Additional Loan"), as is necessary to enable Borrower to
                satisfy his tax obligations to the German tax authority as a
                result of Borrower's receipt of 458,334 shares of Lender common

                                       -2-

<PAGE>

                                                                   EXHIBIT 10.4

                stock of the Lender that Borrower received in connection with
                Lender's acquisition of CATS. Lender will be obligated to make
                the Additional Loan only if the German tax authority issues a
                final tax assessment that assesses a greater tax obligation on
                Borrower than the preliminary tax assessment issued to Borrower
                by the German tax authority for fiscal year 1998 with respect to
                Borrower's receipt of 458,334 shares of Lender common stock in
                connection with Lender's acquisition of CATS.

                ii.     The maximum amount of the Additional Loan is equal to
                (i) DM 2,540,854.82, which is the tax payable by Borrower (based
                on a stock price per share of Lender common stock on May 15,
                1998 of U.S. $11.125 and using an exchange rate of U.S. Dollars
                to DM of 1:1.7746 for May 1998) with respect to Borrower's
                receipt of 458,334 shares of Lender common stock in connection
                with Lender's acquisition of CATS, less (ii) the amount of the
                Initial Loan.

                iii.    To evidence his obligation to repay the Additional Loan,
                and to otherwise induce Lender to make the Additional Loan,
                Borrower shall execute and deliver to Lender the Loan Documents
                with respect to the Additional Loan at such time as the
                Additional Loan is made.

                iv.     To secure Lender's obligation pursuant to this Agreement
                to make the Additional Loan to Borrower, Lender shall deposit
                U.S. $676,319.36 (DM 1,386,454.68 divided by 2.05, the exchange
                rate of U.S. Dollars to DM on June 9, 2000) in an escrow account
                (the "Escrow Account") with Firstar Bank Milwaukee, N.A. (the
                "Escrow Agent") pursuant to an Escrow Agreement dated on or
                about the date of this Agreement among Lender, Borrower, and the
                Escrow Agent, a copy of which is attached as Exhibit F to this
                Agreement. Any interest on the funds in the Escrow Account shall
                be paid to the Lender.

                v.      All funds shall remain in the Escrow Account until the
                earlier of (i) July 1, 2004 or (ii) the date that Borrower
                presents written evidence to Lender and the Escrow Agent that
                the German tax authority has requested payment of the final tax
                assessment with respect to the tax obligations for the 458,334
                shares of Lender common stock that Borrower received in
                connection with Lender's acquisition of CATS. Lender will be
                obligated to make the Additional Loan, and funds from the Escrow
                Account shall be paid to Borrower to fund the Additional Loan,
                within three (3) business days after Borrower presents written
                evidence to Lender that the German tax authority has requested
                payment of the tax obligations described in Section 4 of this
                Agreement.

                vi.     The Escrow Agent is obligated to pay to the Borrower
                funds from the Escrow Account (without permission of the Lender)
                as are necessary to enable Borrower to satisfy his tax
                obligations to the German tax authority as described in Section
                4 of this Agreement upon presentation by Borrower to the Escrow
                Agent of (i) copies of the Loan Documents for the Additional
                Loan executed by Borrower and delivered to Lender, and (ii)
                written evidence to Lender that the

                                       -3-

<PAGE>

                                                                   EXHIBIT 10.4

                German tax authority has requested payment of the tax
                obligations described in Section 4 of this Agreement.

                vii.    Any funds remaining in the Escrow Account after July 1,
                2004 or any funds not needed to pay the final tax assessment
                with respect to the tax obligations for the 458,334 shares of
                Lender common stock that Borrower received in connection with
                Lender's acquisition of CATS shall be returned immediately to
                Lender.

                C.      Definition of the Loans. The Initial Loan and the
Additional Loan are each referred to as a "Loan" and collectively are referred
to as the "Loans."

        2.      LENDER'S COMMITMENT. Lender's obligation to extend the Loans to
Borrower is a valid, legal, irrevocable and binding corporate obligation which
shall not be rescinded or withdrawn in the event of a change of Lender's present
management or ownership.

        3.      TERMS AND CONDITIONS OF LOAN. The Loans shall be governed by the
following terms and conditions in addition to all terms and conditions set forth
in the Loan Documents.

                A.      Payment.

                i.      Notwithstanding any contrary provision set forth herein
                or in any document related hereto, Borrower shall be obligated
                to pay all outstanding principal, together with all then accrued
                and unpaid interest under each Loan, on or before the earlier of
                (a) the end of the three year period that commences on the date
                the Borrower executes and delivers the Loan Documents to Lender
                with respect to each Loan, or (b) that date when the preceding
                five (5) trading days of the Lender's common stock yields an
                average closing price of $11.34 per share (each such date
                hereinafter referred to as the "Maturity Date"). On such
                Maturity Date as defined in Section 3A(i)(b), it shall be within
                Borrower's discretion to repay the Loans either in cash, or, in
                lieu thereof, with shares of the common stock of Lender at an
                agreed upon price of $11.34 per share. For the purpose of
                repaying the Loans with shares of the Lender's common stock as
                provided for in this Section 3A(i), Borrower shall be required
                to utilize that portion of the Collateral (as defined in Section
                3E below) which is equal in value to the amount of Loans being
                repaid.

                ii.     Notwithstanding the foregoing, in the event a Loan is
                still outstanding at end of the three year period that commences
                on the date Borrower executes and delivers the Loan Documents to
                the Lender with respect to such Loan, Borrower shall have the
                option of either: (a) requiring Lender to renew or extend the
                Loan for an additional term of three (3) years or (b) canceling
                the Loan, effective as of the three year anniversary date, by
                providing Lender with written notice in accordance with the
                provisions of Section 10 below, and in exchange for such
                cancellation Borrower shall irrevocably authorize Lender to
                dispose of the

                                       -4-

<PAGE>

                                                                   EXHIBIT 10.4

                Collateral in accordance with the terms and conditions of
                Section 9 below. The parties hereby agree that the three year
                anniversary date shall be the date which coincides with the end
                of the three year period that commences on the date Borrower
                executes and delivers the Loan Documents to the Lender with
                respect to a Loan, and if Borrower elects to cancel such Loan
                effective as of such date, the date shall hereinafter be
                referred to as the "Anniversary Cancellation Date." If on the
                Anniversary Cancellation Date, the value of the Collateral is
                less than the sum of: (i) the outstanding principal balance of
                the Loan; (ii) any accrued but unpaid interest on the Loan;
                (iii) any fees authorized and due and owing to Lender pursuant
                to the Promissory Note with respect to the Loan; and (iv) any
                costs and expenses authorized and due and owing to Lender
                pursuant to the Promissory Note with respect to the Loan,
                Borrower shall not be required to pay to Lender the amount by
                which the sum of items (i) through (iv) exceeds the value of the
                Collateral. On the other hand, if on the Anniversary
                Cancellation Date, the value of the Collateral exceeds the sum
                of items (i) through (iv), Lender shall be required to release
                and return to Borrower, free and clear of all liens and
                encumbrances, the portion of the Collateral which exceeds the
                sum of items (i) through (iv). For purposes of determining the
                value of the Collateral on the Anniversary Cancellation Date,
                the parties shall utilize the closing price of the shares of
                Lender's common stock (as traded on the NASDAQ National Market)
                on that particular date, or, if that date is not a trading day
                on the NASDAQ National Market, the immediately preceding trading
                day.

                iii.    All Shares used by Borrower to repay the Loan pursuant
                to the provisions of Section 3A(i) above, as well as all Shares
                comprising the Collateral used by Borrower to compensate Lender
                for the cancellation of the Loan pursuant to the provisions of
                Section 3A(ii) above, shall be subject to sale by Lender on
                Borrower's behalf in accordance with the terms and conditions of
                Section 9 below, and Borrower shall cooperate with Lender in
                effecting any such sale.

                B.      Interest.

                i.      Except as otherwise provided in Section 5 of the
                Promissory Note, interest shall accrue on the outstanding
                principal balance of each Loan at a rate that is equal to the
                sum of (a) the EURIBOR rate that was in effect at 10:00 A.M. on
                August 2, 1999 (and which is applicable to loans with a maturity
                date of one year); and (b) 1.57%. Interest on the outstanding
                principal balance of the Loans shall be paid annually, on the
                last business day in December of each year, until the entire
                principal is paid.

                ii.     Interest shall be calculated on the basis of a 360 day
                year based upon the actual number of days elapsed. No interest
                shall accrue on a Loan until the Loan is made to Borrower, and
                no interest shall accrue after the Maturity Date (as defined in
                Section 3A(i) above), the Anniversary Cancellation Date (as
                defined in Section 3A(ii) above), or the Cancellation Date (as
                defined in Section 8 below).

                                       -5-

<PAGE>

                                                                   EXHIBIT 10.4

                iii.    The total liability of Borrower under the Loans for
                payment of interest shall not exceed any limitations imposed on
                the payment of interest by applicable usury laws. If any
                interest is received or charged in excess of that amount,
                Borrower shall be entitled to a refund of the excess.

                iv.     Upon the occurrence of an Event of Default under a
                Promissory Note, interest shall accrue at the Default Rate
                thereunder set forth notwithstanding the provisions of this
                section.

                C.      Prepayment. The Borrower shall be entitled to prepay the
Loans in whole or in part at any time without penalty.

                D.      Application of Payments. All payments under the
Promissory Note shall be applied first to the Lender's costs and expenses, then
to fees authorized thereunder, then to interest and then to principal.

                E.      Grant of Security Interest. To secure the due and
punctual payment of the Loans and all of his other liabilities to Lender arising
in connection with the Loans, and all reasonable costs and expenses incurred by
Lender in connection with enforcement or collection of the Loans or any
liability of Borrower in connection therewith (including reasonable legal fees
and expenses incurred in trial, appellate, bankruptcy, and judgment-execution
proceedings) and all reasonable costs and expenses incurred in connection with
realizing on the value of the Collateral (including appraisal fees,
broker-dealer fees, and legal fees incurred in trial, appellate, bankruptcy, and
judgment-execution proceedings), Borrower shall pledge, hypothecate, assign,
convey and grant to Lender a first lien and security interest (collectively, the
"Security Interest") in the following:

                i.      Such number of shares of Lender common stock (the
                "Shares") which is arrived at as a result of dividing (i) the
                original principal sum of the Note (stated in U.S. dollars) by
                (ii) US $6.375; the denominator of US $6.375 being the closing
                price of each share of Lender's common stock (as traded on the
                NASDAQ National Market) on March 31, 1999.

                ii.     All dividends, additional shares or other property or
                securities that are receivable or otherwise distributable at any
                time and from time to time in respect of, or in exchange or
                substitution for, the Shares and all profits therefrom; and

                iii.    All proceeds of the foregoing.

        As used herein, the term "Collateral" refers to all the property
described in this Section 3E, as well as any portion or any interest in it.

        4.      PURPOSE OF LOAN. The purpose of the Loan will be to enable
Borrower to timely satisfy his obligation to pay certain taxes in the Federal
Republic of Germany in connection with Borrower's sale on May 15, 1998 of his
Quotas in CATS. As part of the consideration (the "Consideration") paid to
Borrower in connection with his sale on May 15, 1998 of his Quotas in CATS,
Borrower received 458,334 shares of Lender common stock. The

                                       -6-

<PAGE>

                                                                   EXHIBIT 10.7

purpose of the Loans is to pay the amount of taxes that Borrower is required to
pay to the German tax authority in connection with and as a result of the
458,334 shares of Lender common stock received by Borrower on May 15, 1998 in
connection with the acquisition of CATS.

        5.      REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to lender as follows:

                A.      Authority and Compliance. Borrower has full power and
authority to execute and deliver this Agreement and the Loan Documents and to
incur and perform the obligations provided for therein. No consent or approval
of any public authority or other third party is required as a condition to the
validity of this Agreement or any of the Loan Documents, and Borrower is in
compliance with all laws and regulatory requirements to which they are subject.

                B.      Binding Agreement. This Agreement and the Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms.

                C.      Litigation. There is no proceeding involving Borrower
pending or, to the knowledge of Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as disclosed to
Lender in writing and acknowledged by Lender prior to the date of this
Agreement.

                D.      No Conflicting Agreements. There is no charter, bylaw,
stock provision, partnership agreement or other document pertaining to the power
or authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting his property, which would
conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the Loan Documents.

                E.      Ownership of Collateral. Borrower has good title to the
collateral that will secure the Loans, and the collateral is, and will be kept,
free and clear of liens, except those to be granted to Lender pursuant to the
Stock Pledge Agreement attached hereto in the form of Exhibit B.

        6.      DEFAULT. Borrower shall be in default under this Agreement and
under each of the Loan Documents if he shall default in the payment of any
amounts due and owing to Lender pursuant to the Loan Documents or should he fail
to timely and properly observe, keep or perform any term, covenant, agreement or
condition in any Loan Document or in any other loan agreement, promissory note,
security agreement, deed of trust, deed to secure debt, mortgage, assignment or
other contract securing or evidencing payment of any indebtedness of Borrower to
Lender or any affiliate or subsidiary of Lender.

        7.      REMEDIES UPON DEFAULT. If an event of default shall occur,
Lender shall have all rights, powers and remedies available under each of the
Loan Documents as well as all rights and remedies available at law or in equity.

                                       -7-

<PAGE>

                                                                   EXHIBIT 10.4

        8.      BORROWER'S OPTION TO CANCEL LOAN. Notwithstanding anything to
the contrary in any document or agreement between Borrower and Lender, Borrower
shall have the option, in his sole discretion, at anytime, to cancel the Loans,
and in exchange for such cancellation Borrower shall irrevocably authorize
Lender to dispose of the Collateral in accordance with the terms and conditions
of Section 9 below. For purposes of this Section 8, the "Date of Cancellation"
shall be the date on which Lender receives a written notice from Borrower to
cancel a Loan. The written notice shall be furnished in accordance with the
notice provisions of Section 10 below. Provided, however, that if on the Date of
Cancellation, the value of the Collateral is less than the sum of (i) the
outstanding principal balance of such Loan; (ii) any accrued but unpaid interest
on such Loan; (iii) any fees authorized and due and owing to Lender pursuant to
the Promissory Note; and (iv) any costs and expenses authorized and due and
owing to Lender pursuant to the Promissory Note, Borrower shall be required to
pay to Lender the amount by which the sum of items (i) through (iv) listed in
this Section 8 exceeds the value of the Collateral. Borrower shall have the
option of making the payment herein provided for to Lender in either additional
cash or additional shares of Lender's issued and outstanding common stock. If on
the Date of Cancellation, the value of the Collateral exceeds the sum of items
(i) through (iv) listed in this Section 8, Lender shall be required to release
and return to Borrower, free and clear of all liens and encumbrances, the
portion of the Collateral which exceeds the sum of items (i) through (iv) of
this Section 8. For purposes of determining the value of the Collateral and
additional shares on the Date of Cancellation, the parties shall utilize the
closing price of the shares of Lender's common stock (as traded on the NASDAQ
National Market) on the Date of Cancellation. Any Shares used by Borrower to
compensate Lender in consideration for the cancellation of the Loan pursuant to
the provisions of this Section 8 shall be subject to sale by Lender on
Borrower's behalf pursuant to the terms and conditions of Section 9 below, and
Borrower shall cooperate with Lender in effecting any such sale.

        9.      MECHANISM FOR SALE OF SHARES. The Shares to be pledged by
Borrower to Lender pursuant to the Stock Pledge Agreement will, in part, consist
of a portion of the 343,750 shares of Lender common stock registered with the
United States Securities and Exchange Commission (the "SEC") pursuant to that
certain S-1 Registration Statement dated and filed with the SEC on June 22, 1998
(the "Registered Shares"). The balance of the Shares to be pledged to Lender by
Borrower pursuant to the Stock Pledge Agreement shall consist of shares of
Lender's common stock that have not been registered with the SEC (the
"Non-registered Shares"). It is also contemplated that if Borrower is required
to utilize additional shares to compensate Lender pursuant to the provisions of
Section 8 above or under any of the Loan Documents, Borrower will utilize
Registered Shares and/or Non-registered Shares. If, in order to satisfy any of
Borrower's obligations or commitments pursuant to any Loan Document, a sale must
be made of any or all of the Registered Shares or Non-registered Shares pledged
or otherwise delivered by Borrower to Lender, Borrower shall authorize Lender to
make such sale as an agent of Borrower and on Borrower's behalf. Any sale of
Registered Shares as provided for in this Section 9 shall be made pursuant to
the S-1 Registration Statement, and shall be deemed to be a sale by Borrower
through his duly appointed and authorized agent. Any sale of Non-Registered
Shares as provided for in this Section 9 shall be made pursuant to and in
satisfaction of the requirements of Rule 144 promulgated by the SEC under the
Securities Act of 1933, as amended, and shall be deemed to be a sale by Borrower
through his duly appointed and

                                       -8-

<PAGE>

                                                                   EXHIBIT 10.4

authorized agent. Lender shall have the right to keep and maintain custody of
any and all proceeds of any sale of Registered Shares or Non-registered Shares
in satisfaction of any sum due and owing to Lender pursuant to the Loan
transaction. Borrower's appointment of Lender as his agent for purposes of this
Section 9, and the authorization to be granted to Lender to sell Registered
Shares and/or Non-registered Shares on behalf of Borrower, shall be set forth in
the Promissory Note, Stock Pledge Agreement and Stock Power delivered to Lender
along with the pledged Shares (and in the Stock Power alone, in the case of any
additional shares delivered to Borrower). Further, Borrower shall covenant and
agree to make all such reasonable arrangements, do and perform all such
reasonable acts and things, execute and deliver all such certificates, documents
and other instruments, and to take such further reasonable actions as Lender may
deem necessary or advisable to effect the sale of Registered Shares pursuant to
the S-1 Registration Statement, or Non-registered Shares in compliance with the
requirements of Rule 144, as the case may be, as Borrower's agent and on
Borrower's behalf.

        10.     NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing, and may be by means of facsimile transmission,
delivered to the other party at the following address:

                    If to Lender:

                    FARO Technologies, Inc.
                    125 Technology Park
                    Lake Mary, Florida  32746
                    Telecopy: (407) 333-4181

                    Attention:  Gregory A. Fraser

                    With a copy to:

                    Foley & Lardner
                    100 North Tampa St., Suite 2700
                    Tampa, Florida 33602
                    Telecopy: (813) 221-4210

                    Attention:  Martin A. Traber

                    If to Borrower:

                    Wendelin Karl Johannes Scharbach
                    Schwarzwaldstrasse 94
                    68163 Mannheim
                    Germany
                    Telecopy:  001-49-711-2222-444

                                       -9-

<PAGE>

                                                                   EXHIBIT 10.4

                    With a copy to:

                    Hasche Eschenlohr Peltzer Riesenkampff Fischotter
                    Neidenau 68
                    60325 Frankfurt/Main
                    Germany
                    Telecopy: 011-49-69-71-701-230

                    Attention:  Thomas Link

or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid; (ii) if
electronically transmitted, the next business day after transmission (and the
sender shall bear the burden of proof of delivery), or (iii) if sent by any
other means, upon delivery.

        11.     COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Lender immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees) incurred
by Lender in connection with Lender's enforcement of its rights hereunder or
under the Loan Documents.

        12.     MISCELLANEOUS. Borrower and Lender further covenant and agree as
follows, without limiting any requirement of any of the Loan Documents:

                A.      Cumulative Rights and No Waiver. Each and every right
granted to Lender under any Loan Document, or allowed it by law or equity shall
be cumulative of each other and may be exercised in addition to any and all
other rights of Lender, and no delay in exercising any right shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.

                B.      Legal Matters. The validity, construction, enforcement,
and interpretation of this Agreement shall be governed by the laws of the State
of Florida and the United States of America, without regard to principles of
conflict of laws. Each party to this Agreement (a) consents to the personal
jurisdiction of the state and federal courts having jurisdiction in Seminole
County, Florida, (b) stipulates that the proper, exclusive, and convenient venue
for any legal proceeding arising out of this Agreement is Seminole County,
Florida, for state court proceedings, and the Middle District of Florida,
Orlando Division, for federal district court proceedings, and (c) waives any
defense, whether asserted by a motion or pleading, that Seminole County,
Florida, or the Middle District of Florida, Orlando Division, is an improper or
inconvenient venue. In any mediation, arbitration, or legal proceeding arising
out of this Agreement, the losing party shall reimburse the prevailing party, on
demand, for all costs

                                      -10-

<PAGE>

                                                                   EXHIBIT 10.4

incurred by the prevailing party in enforcing, defending, or prosecuting any
claim arising out of this Agreement, including all fees, costs, and expenses of
experts, attorneys, witnesses, collection agents, and supersedeas bonds, whether
incurred before or after demand or commencement of legal proceedings, and
whether incurred pursuant to trial, appellate, mediation, arbitration,
bankruptcy, administrative, or judgment-execution proceedings.

                C.      Loan to be deemed repaid. A Loan shall be deemed to have
been repaid effective as of the earliest of: (i) the date on which Borrower
prepays such Loan (as allowed under Section 3C above); (ii) the Maturity Date
(as defined in Section 3A(i) above); (iii) the Anniversary Cancellation Date (as
defined in Section 3A(ii) above); or (iv) the Cancellation Date (as defined in
Section 8 above), so long as by the particular date Lender has received from
Borrower any combination of cash and/or shares of Lender's stock sufficient to
cover the then outstanding Loan obligations in accordance with the provisions of
this Agreement. From and after the repayment date, Borrower shall have no
obligations to Lender with respect to a Loan pursuant to or under this Agreement
or the Loan Documents, except for Borrower's obligation to cooperate with lender
in disposing of the Collateral Shares (and any additional shares delivered to
Lender) pursuant to the provisions of Section 9 above.

                D.      Amendment. No modification, consent, amendment or waiver
of any provision of this Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Lender, and then shall be effective only in the specified instance
and for the purpose for which given. This Agreement is binding upon Borrower,
his heirs, successors and assigns, and inures to the benefit of Lender, its
successors and assigns; however, no assignment or other transfer of Borrower's
rights or obligations hereunder shall be made or be effective without Lender's
prior written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Agreement.

                E.      Partial Invalidity. The unenforceability or invalidity
of any provision of this Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or unenforceability of
any provision of any Loan Document to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to other
persons or circumstances.

                F.      This Agreement amends and restates the Original Loan
Agreement in its entirety, and the Original Loan Agreement is no longer in
effect.

        13.     NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

        To the extent permitted by law, the Borrower agrees to and does hereby
waive trial by jury in any action, proceeding, or counterclaim brought by either
the Borrower or the Lender on any matters whatsoever arising out of or in any
way connected with this Agreement or any claim

                                      -11-

<PAGE>

                                                                   EXHIBIT 10.4

of damage resulting from any act or omission of the Borrower or Lender or either
of them in any way connected with this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.

                                          LENDER

                                          FARO Technologies, Inc.

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

                                          Name:
                                               ---------------------------------

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

                                          BORROWER

                                          --------------------------------------
                                          Wendelin Karl Johannes Scharbach

                                      -12-

<PAGE>

                                                               EXHIBIT 10.4-A

                                 PROMISSORY NOTE

                                U.S. $563,122.02

Mannheim                                                           June 27, 2000
Federal Republic of Germany

        FOR VALUE RECEIVED, the undersigned, Wendelin Karl Johannes Scharbach,
an individual resident of the Federal Republic of Germany (the "Maker"), whose
current mailing address is Schwarzwaldstrasse 94, 68163 Mannheim, Germany,
hereby promises to pay to the order of FARO Technologies Inc., a Florida
corporation (the "Payee"), whose current business address is 125 Technology
Park, Lake Mary, FL 32746, the principal sum of Five Hundred Sixty-three
Thousand One Hundred Twenty-two and 02/100 United States Dollars (U.S.
$563,122.02), together with interest on the outstanding principal balance hereof
at the rate provided for herein. This note (the "Note") shall be governed by the
following provisions:

        1.      Payment.

                A.      Notwithstanding any contrary provision set forth herein
or in any document related hereto, Maker shall be obligated to pay all
outstanding principal, together with all then accrued and unpaid interest under
the Note, on or before the earlier of (a) June 27, 2003 or (b) that date when
the preceding five (5) trading days of the Payee's common stock yields an
average closing price of $11.34 per share (each such date hereinafter referred
to as the "Maturity Date"). On such Maturity Date as defined in Section 1(i)(b),
it shall be within Maker's discretion to repay the Note either in cash, or, in
lieu thereof, with shares of the common stock of Payee at an agreed upon price
of $11.34 per share. For the purpose of repaying the Note with shares of the
Payee's common stock, Maker shall be required to utilize that portion of the
Collateral (as described in Section 10 below) which is equal in value to the
Note obligation being repaid.

                B.      Notwithstanding the foregoing, in the event the Note is
still outstanding as of June 27, 2003, Maker shall have the option of either:
(a) requiring Payee to renew or extend the Note for an additional term of three
(3) years or (b) canceling the Note, effective as of that date, by providing
Payee with written notice in accordance with the notice provisions of the Loan
Agreement, and in exchange for such cancellation Maker shall irrevocably
authorize Payee to dispose of the Collateral in accordance with the terms and
conditions of Section 9 below. If Maker elects to cancel the Note effective as
of June 27, 2003, that date shall hereinafter be referred to as the "Anniversary
Cancellation Date." If on the Anniversary Cancellation Date, the value of the
Collateral is less than the sum of: (i) the outstanding principal balance of the
Note; (ii) any accrued but unpaid interest on the Note; (iii) any fees
authorized and due and owing to Payee pursuant to the Note; and (iv) any costs
and expenses authorized and due and owing to Payee pursuant to the Note, Maker
shall not be required to pay to Payee the amount by which the

                                       A-1

<PAGE>

                                                                 EXHIBIT 10.4-A

sum of items (i) through (iv) exceeds the value of the Collateral. On the other
hand, if on the Anniversary Cancellation Date, the value of the Collateral
exceeds the sum of items (i) through (iv), Payee shall be required to release
and return to Maker, free and clear of all liens and encumbrances, the portion
of the Collateral which exceeds the sum of items (i) through (iv). For purposes
of determining the value of the Collateral on the Anniversary Cancellation Date,
the parties shall utilize the closing price of the shares of Payee's common
stock (as traded on the NASDAQ National Market) on that particular date, or, if
that date is not a trading day on the NASDAQ National Market, the immediately
preceding trading day.

                C.      All Shares used by Maker to repay the Note pursuant to
the provisions of Section 1(i) above, as well as all Shares comprising the
Collateral used by Maker to compensate Payee for cancellation of the Note
pursuant to the provisions of Section 1(ii) above, shall be subject to sale by
Payee on Maker's behalf in accordance with the terms and conditions of Section 9
below, and Maker shall cooperate with Payee in effecting any such sale.

        2.      Interest.

                A.      Except as otherwise provided in Section 5 below,
interest shall accrue on the outstanding principal balance hereof at a rate per
annum equal to the sum of (a) the EURIBOR rate that was in effect at 10:00 A.M.
on August 2, 1999 (and which is applicable to loans with a maturity date of one
year); and (b) 1.57% percent (1.57%). Interest on the outstanding principal
balance of the Note shall be paid annually, on the last business day in December
of each year, until the entire principal is paid.

                B.      Interest shall be calculated on the basis of a 360 day
year based upon the actual number of days elapsed. No interest shall accrue
after the Maturity Date (as defined in Section 1(i) above), the Anniversary
Cancellation Date (as defined in Section 1(ii) above), or the Cancellation Date
(as defined in Section 8 below).

                C.      The total liability of the Maker for payment of interest
shall not exceed any limitations imposed on the payment of interest by
applicable usury laws. If any interest is received or charged by any holder
hereof in excess of that amount, the Maker shall be entitled to a refund of the
excess.

                D.      Upon the occurrence of an Event of Default hereunder,
interest shall accrue at the Default Rate hereinafter set forth notwithstanding
the provisions of this section.

        3.      Prepayment. The Maker shall be entitled to prepay this Note in
whole or in part at any time without penalty.

        4.      Application of Payments. All payments hereunder shall be applied
first to the Payee's costs and expenses, then to fees authorized hereunder, then
to interest and then to principal.

        5.      Default. An Event of Default shall be deemed to have occurred
hereunder upon the occurrence of any of the following events: (a) the Maker's
failure to pay any principal, interest or other amounts hereunder as and when
due and payable; (b) the commencement of any

                                       A-2

<PAGE>

                                                                 EXHIBIT 10.4-A

bankruptcy or insolvency proceedings by the Maker or, if commenced against the
Maker and not discharged within 60 days, or if an order for relief is entered by
the appropriate bankruptcy court; or (c) material falsity in any certificate,
statement, representation, warranty or audit at any time furnished to the Payee
by or on behalf of the Maker and including any omission to disclose any
substantial contingent or liquidated liabilities or any material adverse change
in any facts disclosed by any certificate, statement, representation, warranty
or audit furnished to the Payee. If any Event of Default shall occur, all then
outstanding principal hereunder, all accrued and unpaid interest hereunder and
all other amounts payable under this Note shall be forthwith due and payable
without presentment, further demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Maker. Upon the occurrence of any
Event of Default, the outstanding principal of this Note, and any accrued and
unpaid interest, shall bear interest at a rate of either four percent (4%) per
annum above the rate specified in subparagraph 2(i) above after default until
paid or, if such rate is usurious under the laws of Florida, then at the highest
legal rate permissible thereunder (the "Default Rate").

        6.      Expenses. The Maker agrees to pay the Payee all costs incurred
by it in connection with the collection of this Note. Such costs include,
without limitation, fees for the services of counsel and legal assistants
employed to collect this Note, whether or not suit be brought, and whether
incurred in connection with collection, trial, appeal or otherwise. The Maker
further agrees to indemnify and hold the Payee harmless against liability for
the payment of state documentary stamp taxes, intangible taxes or other taxes
(including interest and penalties, if any), excluding income or service taxes of
the Payee, which may be determined to be payable with respect to this
transaction.

        7.      Late Charge. The Maker shall pay a late charge on each and every
payment due hereunder and not received by the Payee within ten (10) days after
it is due. The amount of the late charge shall in each instance equal the
greater of: (a) $100.00; or (b) five percent (5.0%) of the delinquent payment.
The late charge is not a penalty, but liquidated damages to defray
administrative and related expenses due to such late payment. The late charge
shall be immediately due and payable and shall be paid by the Maker to the Payee
without notice or demand. Further, the acceptance of a late payment shall not
constitute a waiver of any default then existing or thereafter arising under
this Note.

        8.      Maker's Option To Cancel Note. Notwithstanding anything to the
contrary in any document or agreement between Maker and Payee, Maker shall have
the option, in his sole discretion, at anytime, to cancel the Note, and in
exchange for such cancellation Maker shall irrevocably authorize Payee to
dispose of the Collateral in accordance with the terms and conditions of Section
9 below. For purposes of this Section 8, the "Date of Cancellation" shall be the
date on which Payee receives a written notice from Maker to cancel the Note. The
written notice shall be furnished in accordance with the notice provisions of
the Loan Agreement. Provided, however, that if on the Date of Cancellation, the
value of the Collateral is less than the sum of (i) the outstanding principal
balance of the Note; (ii) any accrued but unpaid interest on the Note; (iii) any
fees authorized and due and owing to Payee pursuant to the Note; and (iv) any
costs and expenses authorized and due and owing to Payee pursuant to the Note,
Maker shall be required to pay to Payee the amount by which the sum of items (i)
through (iv) listed in this Section 8 exceeds the value of the Collateral. Maker
shall have the option of making the

                                       A-3

<PAGE>

                                                                EXHIBIT 10.4-A

payment herein provided for to Payee in either additional cash or additional
shares of Payee's issued and outstanding common stock. If on the Date of
Cancellation, the value of the Collateral exceeds the sum of items (i) through
(iv) listed in this Section 8, Payee shall be required to release and return to
Maker, free and clear of all liens and encumbrances, the portion of the
Collateral which exceeds the sum of items (i) through (iv) of this Section 8.
For purposes of determining the value of the Collateral and additional shares on
the Date of Cancellation, the parties shall utilize the closing price of the
shares of Payee's common stock (as traded on the NASDAQ National Market) on the
Date of Cancellation. Any Shares used by Maker to compensate Payee in
consideration for the cancellation of the Note pursuant to the provisions of
this Section 8 shall be subject to sale by Payee on Maker's behalf pursuant to
the terms and conditions of Section 9 below, and Maker shall cooperate with
Payee in effecting any such sale.

        9.      Mechanism for Sale of the Shares. The Shares pledged by Maker to
Payee pursuant to the Stock Pledge Agreement consists, in part, of a portion of
the 343,750 shares of Payee common stock registered with the United States
Securities and Exchange Commission (the "SEC") pursuant to that certain S-1
Registration Statement dated and filed with the SEC on June 22, 1998 (the
"Registered Shares"). The balance of the Shares pledged to Payee by Maker
pursuant to the Stock Pledge Agreement consists of shares of Payee's common
stock that have not been registered with the SEC (the "Non-registered Shares").
It is also contemplated that if Maker is required to utilize additional shares
to compensate Payee pursuant to the provisions of Section 8 above or under any
of the Loan Documents, Maker will utilize Registered Shares and/or
Non-registered Shares. If, in order to satisfy any of Maker's obligations or
commitments pursuant to any Loan Document, a sale must be made of any or all of
the Registered Shares or Non-registered Shares pledged or otherwise delivered by
Maker to Payee, Maker hereby authorize Payee to make such sale as the Agent (as
defined below) of Maker and on Maker's behalf. Any sale of Registered Shares as
provided for in this Section 9 shall be made pursuant to the S-1 Registration
Statement, and shall be deemed to be a sale by Maker through his duly appointed
and authorized Agent. Any sale of Non-Registered Shares as provided for in this
Section 9 shall be made pursuant to and in satisfaction of the requirements of
Rule 144 promulgated by the SEC under the Securities Act of 1933, as amended,
and shall be deemed to be a sale by Maker through his duly appointed and
authorized Agent. Payee is hereby irrevocably granted the right to keep and
maintain custody of any and all proceeds of any sale of Registered Shares,
Non-registered Shares and other components of the Collateral in satisfaction of
any sum due and owing to Payee pursuant to the Loan transaction.

        10.     Security Interest. In accordance with the terms and conditions
of that certain Pledge Agreement dated as of the date hereof (the "Pledge
Agreement") between Payee and Maker, this Note is secured by the "Collateral"
described and defined in Section 1 of said Pledge Agreement. Without affecting
the liability of Maker hereunder, the Payee may, from time to time and without
notice, renew or extend the time for payment, accept partial payments, release
or impair any collateral security for payment of this Note, or agree not to sue
any party liable on it. Maker hereby waives presentment, demand, notice of
dishonor and protest.

                                       A-4

<PAGE>

                                                                 EXHIBIT 10.4-A

        11.     Miscellaneous.

                A.      The Note shall be deemed to have been repaid effective
as of the earliest of: (i) the date on which Maker prepays the Note (as allowed
under Section 3 above); (ii) the Maturity Date (as defined in Section 1(i)
above); (iii) the Anniversary Cancellation Date (as defined in Section 1(ii)
above); or (iv) the Cancellation Date (as defined in Section 8 above), so long
as by the particular date Payee has received from Maker any combination of cash
and/or shares of Payee's stock sufficient to cover the then outstanding Loan
obligations in accordance with the provisions of the Agreement and the Loan
Documents. From and after the repayment date, Maker shall have no obligations to
Payee pursuant to or under the Agreement or the Loan Documents, except for
Maker's obligation to cooperate with Payee in disposing of the Collateral Shares
(and any additional shares delivered to Payee) pursuant to the provisions of
Section 9 above.

                B.      Except as otherwise provided herein or in any other Loan
Document, the Maker shall make all payments hereunder in lawful money of the
United States of America at the Payee's principal address in the Federal
Republic of Germany or at such other place as the Payee may from time to time
designate in writing.

                C.      The remedies of the Payee as provided herein shall be
cumulative and concurrent, and may be pursued singly, successively or together,
at the sole discretion of the Payee and may be exercised as often as occasion
therefor shall arise.

                D.      No act of omission or commission of the Payee, including
specifically any failure to exercise any right, remedy or recourse, shall be
effective, unless set forth in a written document executed by the Payee and then
only to the extent specifically recited therein. A waiver or release with
reference to one event shall not be construed as continuing, as a bar to, or as
a waiver or release of any subsequent right, remedy or recourse as to any
subsequent event.

                E.      The validity, construction, enforcement, and
interpretation of this Note shall be governed by the laws of the State of
Florida and the United States of America, without regard to principles of
conflict of laws.

                F.      The Maker (a) consents to the personal jurisdiction of
the state and federal courts having jurisdiction in Seminole County, Florida,
(b) stipulates that the proper, exclusive, and convenient venue for any legal
proceeding arising out of this Note is Seminole County, Florida, for state court
proceedings, and the Middle District of Florida, Orlando Division, for federal
district court proceedings, and (c) waives any defense, whether asserted by a
motion or pleading, that Seminole County, Florida, or the Middle District of
Florida, Orlando Division, is an improper or inconvenient venue.

                G.      Maker's obligations to Payee hereunder and under the
other Loan Documents are secured by the Collateral, based on the fact that the
parties hereto have mutually agreed that the shares of stock pledged as
collateral are to be valued at $6.375 each as of the date hereof. For so long as
the value of the Collateral is sufficient to cover Maker's obligations to Payee
hereunder and under the other Loan Documents (regardless of whether such
obligations

                                       A-5

<PAGE>

                                                                EXHIBIT 10.4-A

become due on the dates provided for herein or as a result of Maker's Default
hereunder or otherwise), then Maker shall not be personally liable to Payee, and
Payee shall not seek personal judgment against Maker or any of Maker's heirs or
assigns for such obligations. For so long as the value of the Collateral is
sufficient to cover Maker's obligations to Payee hereunder and under the other
Loan Documents, any judgment or decree in any action brought to enforce such
obligations shall be enforceable against Maker only to the extent of his
interest in the Collateral, and any such judgment or decree shall not be subject
to execution upon or be a lien upon the assets of Maker, other than his interest
in the Collateral. In determining whether the value of the Collateral is
sufficient to cover Maker's obligations to Payee on any particular day, the
parties shall utilize the closing price of the shares of Payee's common stock
(as traded on the NASDAQ National Market) on such day. By way of illustration
only: If the sum of (a) the outstanding principal balance of the Note; (b) any
accrued but unpaid interest on the Note; (c) any fees authorized and due and
owing to Payee pursuant to the Note; and (d) any costs and expenses authorized
and due and owing to Payee pursuant to the Note on any particular day is equal
to $1,000,000.00, then Maker shall not be personally liable to Payee if the
value of the Collateral on such day is also $1,000,000.00. If however, the value
of the Collateral on the hypothetical day is only $750,000.00 (perhaps due to a
closing price of less than $6.375 per share on such day), then maker shall be
personally liable for the shortfall of $250,000.00; and Payee shall be entitled
to seek personal judgment against Maker or any of Maker's heirs or assigns for
such shortfall. Accordingly, if the value of the Collateral exceeds Maker's
obligations to Payee on the hypothetical day, Payee shall be required to return
any such excess amount to Maker. Nothing contained in this paragraph shall
affect or limit the ability of Payee to enforce any of its rights or remedies
with respect to the Collateral.

                H.      In any mediation, arbitration, or legal proceeding
arising out of this Note, the losing party shall reimburse the prevailing party,
on demand, for all costs incurred by the prevailing party in enforcing,
defending, or prosecuting any claim arising out of this Note, including all
fees, costs, and expenses of experts, attorneys, witnesses, collection agents,
and supersedeas bonds, whether incurred before or after demand or commencement
of legal proceedings, and whether incurred pursuant to trial, appellate,
mediation, arbitration, bankruptcy, administrative, or judgement-execution
proceedings.

                I.      The term "Payee" as used herein shall mean any lawful
holder of this Note. To the extent permitted by law, the Maker agrees to and
does hereby waive trial by jury in any action, proceeding, or counterclaim
brought by either the Maker or the Payee on any matters whatsoever arising out
of or in any way connected with this Note or any claim of damage resulting from
any act or omission of the Maker or Payee or either of them in any way connected
with this Note.

        IN WITNESS WHEREOF, the Maker has executed this Note as of the date
first written above.

WITNESSES:

                                       A-6

<PAGE>

                                                                EXHIBIT 10.4-A

Signature:                                By:
          ---------------------------        -----------------------------------
                                             Wendelin Karl Johannes Scharbach

Print Name:                               Print Name:
           --------------------------                ---------------------------

                                       A-7

<PAGE>

                                                                EXHIBIT 10.4-A

                      MAKER'S APPOINTMENT OF PAYEE AS AGENT

        In consideration of the covenants contained above, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by both Maker and Payee, Maker hereby appoints Payee as his agent
and attorney-in-fact (the "Agent") to sell or otherwise dispose of (i) any
portion or all of the Collateral (as referred to in Section 10 above) including,
but not limited to, the Registered Shares and Non-registered Shares that are
components thereof; and (ii) any additional Registered Shares and/or
Non-registered Shares that Maker delivers to Payee pursuant to the terms and
conditions of the Loan Documents. Maker covenants and agrees to make all such
reasonable arrangements, do and perform all such reasonable acts and things,
execute and deliver all such certificates, documents and other instruments, and
to take such further reasonable actions as Payee may deem necessary or advisable
to effect the sale of Registered Shares pursuant to the S-1 Registration
Statement, or Non-registered Shares in compliance with the requirements of Rule
144, as the case may be, as Maker's Agent and on Maker's behalf. Maker grants
Payee full and unfettered authorization to dispose of the Collateral, and any
portion thereof, in accordance with the terms and conditions of Section 9 above,
as well as any other applicable provision of the Loan Documents. Further, Maker
agrees to indemnify and hold Payee harmless from liability for any and all
losses or damages asserted or suffered by any party as a result of Payer's
performance as Maker's Agent. Payee's appointment hereunder is irrevocable and
shall remain in full force and effect for so long as Maker has not satisfied all
of his obligations pursuant to the Loan Documents. Payee hereby accepts its
appointment as Maker's Agent under the terms and conditions hereof. The
appointment and authorization effected hereby, and the indemnification provided
for herein, shall (i) inure to the benefit of Payee, its successors and assigns;
and (ii) be binding upon Maker, his heirs and assigns.

                                          FARO Technologies, Inc.

                                          By:
-------------------------------------        -----------------------------------
Wendelin Karl Johannes Scharbach

                                          Name:
                                               ---------------------------------

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

                                       A-8

<PAGE>

                                                                  EXHIBIT 10.4-B

                             STOCK PLEDGE AGREEMENT

Mannheim, Germany                                                  June 27, 2000

        THIS STOCK PLEDGE AGREEMENT (this "Agreement") is executed and made
effective as of June 27, 2000, by Wendelin Karl Johannes Scharbach, an
individual resident of Germany ("Borrower") whose current mailing address is
Schwarzwaldstrasse 94, 68163 Mannheim, Germany in favor of FARO Technologies,
Inc., a corporation organized and existing under the laws of the State of
Florida ("FARO") whose current mailing address is 125 Technology Park, Lake
Mary, FL 32746.

                                    RECITALS

        WHEREAS, contemporaneously herewith, Borrower has made and delivered to
FARO a Promissory Note in the original principal amount of U.S. $563,122.02 (the
"Note"); and

        WHEREAS, to secure the prompt payment and performance of all of the
liabilities, obligations, and indebtedness of Borrower to FARO under the Note
(the "Liabilities"), Borrower desires to pledge, grant, hypothecate, assign, and
convey to FARO a first lien and security interest in and to: (a) the "Shares" of
FARO common stock described and defined on Schedule A attached hereto; and (b)
the property described in Sections 1(ii) and 1(iii) of this Agreement.

        NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, and agreements set forth herein, the
parties hereto hereby agree as follows:

        1.      Grant of Security Interest. To secure the due and punctual
payment of the Liabilities, and all reasonable costs and expenses incurred by
FARO in connection with enforcement or collection of the Liabilities (including
reasonable legal fees and expenses incurred in trial, appellate, bankruptcy, and
judgment-execution proceedings) and all reasonable costs and expenses incurred
in connection with realizing on the value of the security provided by this
Agreement (including appraisal fees, broker-dealer fees, and legal fees incurred
in trial, appellate, bankruptcy, and judgment-execution proceedings), Borrower
hereby pledges, grants, hypothecates, assigns, conveys, and grants to FARO a
first lien and security interest (collectively, the "Security Interest") in the
following:

                A.      all of the Shares listed on Schedule A to this
Agreement;

                B.      all dividends, additional shares or other property or
securities that are receivable or otherwise distributable at any time and from
time to time in respect of, or in exchange or substitution for, the Shares and
all profits therefrom; and

                C.      all proceeds of the foregoing.

        As used in this Agreement, the term "Collateral" refers to all the
property described in this Section 1, as well as any portion or any interest in
it.

                                       B-1

<PAGE>

                                                                  EXHIBIT 10.4-B

        2.      Representations and Warranties. Borrower covenants to FARO that,
except for the Security Interest granted to FARO by this Agreement:

                A.      Borrower is and will be the sole legal and equitable
owner of the Collateral;

                B.      the Collateral is and will be free and clear of all
liens, encumbrances, security interests, assessments, and adverse claims of
every kind and nature;

                C.      the grant of this Security Interest does not and will
not violate the terms of any agreement applicable to Borrower; and

                D.      Borrower has not, and will not, sell, assign, convey,
pledge, transfer, hypothecate, or in any other way dispose of or encumber the
Collateral, other than as provided in this Agreement.

        3.      Delivery of Collateral. Upon execution of this Agreement,
Borrower shall deliver the Shares to FARO. Borrower shall immediately provide
notice to the transfer agent of FARO of the Security Interest and shall cause
such Security Interest to be noted in the transfer records of such transfer
agent. Borrower shall deliver to FARO immediately upon receipt any Collateral
which is subsequently acquired by Borrower, or which is delivered to Borrower,
in exchange or substitution for any or all of the Collateral.

        4.      Maintenance of Security Interest. Borrower shall, upon request,
take any action reasonably deemed advisable by FARO to preserve the Collateral
or to establish, determine priority of, perfect, continue perfection of,
terminate or enforce FARO's Security Interest or its rights under this
Agreement.

        5.      Rights of FARO. FARO may at any time, upon or after the
occurrence of a default under the Note that is not cured within any applicable
grace or cure period, or after maturity of any of the Liabilities and without
notice or demand of any kind (a) transfer any of the Collateral into its name or
that of its nominee, (b) notify obligors on or issuers of any Collateral to make
payment or delivery to FARO of any amounts, securities, or rights due or
distributable thereon or notices given in connection therewith, (c) in
Borrower's name or otherwise, enforce collection of any Collateral by suit or
otherwise, or surrender, release or exchange all or part of it, or compromise,
extend or renew for any period any obligation evidenced by the Collateral, (d)
receive proceeds of the Collateral and exercise all rights as a holder of the
Collateral, (e) hold any increase or profits (including money) received from the
Collateral and exercise all rights as a holder of the Collateral, (f) hold any
increase or profits (including money) received from the Collateral as additional
security for the Liabilities, and (g) sign or endorse Borrower's name on the
Collateral.

        6.      Default. A default under the Note or Borrower's failure to
perform its obligations under this Agreement shall constitute a default under
this Agreement.

        7.      Irrevocable Proxy on Default. In addition to FARO's other
rights, Borrower irrevocably appoints FARO as proxy, with full power of
substitution and revocation (upon the

                                       B-2

<PAGE>

                                                                  EXHIBIT 10.4-B

occurrence of a default under the Note or hereunder that is not cured within any
applicable grace or cure period) to exercise Borrower's rights to attend
meetings, vote, consent to, and take any action respecting the Collateral as
fully as Borrower might do. This proxy shall become effective upon the
occurrence of a default that is not cured within any applicable grace or cure
periods and shall remain effective for so long as any of the Liabilities are
unpaid.

        8.      Termination. This Agreement and the Security Interest of FARO
under it will terminate when all the Liabilities are paid in full. Upon
termination of this Agreement, FARO shall reassign and deliver to Borrower the
Collateral that is then held by FARO under this Agreement and has not been sold
or otherwise applied pursuant to the terms of this Agreement; provided, however,
in the event that another creditor of Borrower has been granted a pledge of the
Collateral subordinate to FARO, and FARO has actual notice of such pledge,
Borrower authorizes FARO to deliver the Collateral to such other creditor.

        9.      Legal Matters. The validity, construction, enforcement, and
interpretation of this Agreement shall be governed by the laws of the State of
Florida and the United States of America, without regard to principles of
conflict of laws. Each party to this Agreement (a) consents to the personal
jurisdiction of the state and federal courts having jurisdiction in Seminole
County, Florida, (b) stipulates that the proper, exclusive, and convenient venue
for any legal proceeding arising out of this Agreement is Seminole County,
Florida, for state court proceedings, and the Middle District of Florida,
Orlando Division, for federal district court proceedings, and (c) waives any
defense, whether asserted by a motion or pleading, that Seminole County,
Florida, or the Middle District of Florida, Orlando Division, is an improper or
inconvenient venue. In any mediation, arbitration, or legal proceeding arising
out of this Agreement, the losing party shall reimburse the prevailing party, on
demand, for all costs incurred by the prevailing party in enforcing, defending,
or prosecuting any claim arising out of this Agreement, including all fees,
costs, and expenses of experts, attorneys, witnesses, collection agents, and
supersedeas bonds, whether incurred before or after demand or commencement of
legal proceedings, and whether incurred pursuant to trial, appellate, mediation,
arbitration, bankruptcy, administrative, or judgment-execution proceedings.

        10.     Entire Understanding; Waiver. This Agreement records the final,
complete, and exclusive understanding among the parties regarding the subjects
addressed herein and supersede any prior or contemporaneous agreement,
understanding, or representation, oral or written by any of them on such
subjects. The provisions hereof may not be changed, modified, waived, or altered
except by an agreement in writing signed by the party entitled to the benefit of
the provision to be waived hereto. A waiver by any party of any of the terms or
conditions of this Agreement, or of any breach thereof, shall not be deemed a
waiver of such term or condition for the future, or of any other term or
condition hereof, or of any subsequent breach thereof.

        11.     Severability. Whenever possible, each provision of this
Agreement should be construed and interpreted so that it is valid and
enforceable under applicable law. If a provision of this Agreement is held to be
invalid or unenforceable under applicable law, however, that provision will be
deemed separable from the remaining provisions of this Agreement and will not
affect the validity or interpretation of the other provisions of this Agreement
or the application of that provision to other circumstances in which it is valid
and enforceable.

                                       B-3

<PAGE>

                                                                  EXHIBIT 10.4-B

        12.     Notices. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing, and may be by means of facsimile transmission,
delivered to the other party at the following address:

                    If to FARO:

                    FARO Technologies, Inc.
                    125 Technology Park
                    Lake Mary, Florida  32746
                    Telecopy: (407) 333-4181

                    Attention:  Gregory A. Fraser

                    With a copy to:

                    Foley & Lardner
                    100 North Tampa St., Suite 2700
                    Tampa, Florida 33602
                    Telecopy: (813) 221-4210

                    Attention:  Martin A. Traber

                    If to Borrower:

                    Wendelin Karl Johannes Scharbach
                    Schwarzwaldstrasse 94
                    68163 Mannheim
                    Germany
                    Telecopy: 011-49-711-2222-444

                                       B-4

<PAGE>

                                                                  EXHIBIT 10.4-B

                    With a copy to:

                    Hasche Eschenlohr Peltzer Riesenkampff Fischotter
                    Neidenau 68
                    60325 Frankfurt/Main
                    Germany
                    Telecopy: 011-49-69-71-701-230

                    Attention:  Thomas Link

or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid; (ii) if
electronically transmitted, the next business day after transmission (and the
sender shall bear the burden of proof of delivery); or (iii) if sent by any
other means, upon delivery.

        13.     Effectiveness. This Agreement will become effective with respect
to the original parties to it, as of its stated execution date, when each of
those parties has executed and delivered to the others a counterpart of this
Agreement.

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

        15.     Miscellaneous. Time is of the essence of this Agreement. A
delay, omission, or course of dealing on the part of FARO in exercising any
right, power, or remedy will not operate as a waiver of it. A single or partial
exercise by FARO of any right, power, or remedy does not preclude any further
exercise or non-exercise of it or the exercise or non-exercise of any other
right, power or remedy. The exercise or non-exercise by FARO of any right,
power, or remedy does not constitute a waiver of a default under this Agreement.

        16.     Cancellation of Loan. Notwithstanding any provision contained
herein, or in any other document or agreement between FARO and Borrower,
Borrower shall have the option, in his sole discretion, at any time, to cancel
the Note pursuant to and in compliance with the provisions of Section 8 thereof.

                                       B-5

<PAGE>

                                                                  EXHIBIT 10.4-B

        IN WITNESS WHEREOF, the Borrower has executed this Agreement as of the
date first written above.

WITNESSES:

Signature:                                By:
          ---------------------------        -----------------------------------
                                              Wendelin Karl Johannes Scharbach

Print Name:                               Print Name:
           --------------------------                ---------------------------

Signature:
          ---------------------------

Print Name:
           --------------------------

                     BORROWER'S APPOINTMENT OF FARO AS AGENT

        In consideration of the covenants contained above, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by both Borrower and FARO, Borrower hereby appoints FARO as his
agent and attorney-in-fact (the "Agent") to sell or otherwise dispose of (i) any
portion or all of the Collateral (as referred to and defined in Section 1 above)
including, but not limited to, the Registered Shares and Non-registered Shares
that are components thereof; and (ii) any additional Registered Shares and/or
Non-registered Shares that Borrower delivers to FARO pursuant to the terms and
conditions of the Loan Documents. Borrower covenants and agrees to make all such
reasonable arrangements, do and perform all such reasonable acts and things,
execute and deliver all such certificates, documents and other instruments, and
to take such further reasonable actions as FARO may deem necessary or advisable
to effect the sale of Registered Shares pursuant to the S-1 Registration
Statement, or Non-registered Shares in compliance with the requirements of Rule
144, as the case may be, as Borrower's Agent and on Borrower's behalf. Borrower
grants FARO full and unfettered authorization to dispose of the Collateral, and
any portion thereof, in accordance with the terms and conditions of the Note, as
well as any other applicable provision of the Loan Documents. Further, Borrower
agrees to indemnify and hold FARO harmless from liability for any and all losses
or damages asserted or suffered by any party as a result of FARO's performance
as Borrower's Agent. FARO's appointment hereunder is irrevocable and shall
remain in full force and effect for so long as Borrower has not satisfied all of
his obligations pursuant to the Loan Documents. FARO hereby accepts its
appointment as Borrower's Agent under the terms and conditions hereof. The
appointment and authorization effected hereby, and the indemnification provided
for herein, shall (i) inure to the benefit of FARO, its successors and assigns;
and (ii) be binding upon Borrower, his heirs and assigns.

                                          FARO Technologies, Inc.

                                          By:
-------------------------------------        -----------------------------------
Wendelin Karl Johannes Scharbach          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

                                       B-6

<PAGE>

                                                                  EXHIBIT 10.4-B

                                   SCHEDULE A

                                   THE SHARES

88,333 shares of the issued and outstanding common stock of FARO Technologies,
Inc., a Florida corporation, which is arrived at as a result of dividing the
original principal sum of the Note (stated in US dollars) by US $6.375 (the
"Shares").

                                       B-7

<PAGE>

                                                                EXHIBIT 10.4-C

                                    AFFIDAVIT
                                       AND
                               INDEMNITY AGREEMENT

Mannheim, Germany                                                  June 27, 2000

        I, the undersigned, Wendelin Karl Johannes Scharbach, an individual
resident of Germany (the "Affiant") whose current mailing address is
Schwarzwaldstrabe 94, 68163 Mannheim, Germany, hereby represent and warrant as
follows:

        That Affiant is the sole record owner and entitled to the possession of
the Certificate(s) described below representing an aggregate of one hundred
eighty-one thousand eighty-two (181,082) shares of the issued and outstanding
common stock of FARO Technologies, Inc., a Florida corporation (the "Company"),
such Certificate(s) being referred to hereafter as the "Original
Certificate(s)".

 Certificate     Date of                 Registered in                  Number
   Number      Certificate               the Name of                  of Shares
------------    -----------              -------------                ----------
____________    ___________    Wendelin Karl Johannes Scharbach       __________
____________    ___________    Wendelin Karl Johannes Scharbach       __________

        Affiant hereby certifies that, apart from the security interest granted
to the Company pursuant to that certain Pledge Agreement dated and made
effective as of the date of this Agreement by Affiant in favor of Company, no
other person has any right, title or interest in the Original Certificate(s) or
the securities represented thereby. Affiant will not hereafter sell, assign,
transfer, hypothecate, pledge or otherwise dispose of, either in whole or in
part, such Original Certificate(s) or the securities represented thereby, nor
give any person any power of attorney, order or other authority of any kind or
nature whatsoever to transfer such Original Certificate(s) or the securities
represented thereby, or any part or portion thereof or interest therein, without
first obtaining the written consent of the Company. Further, Affiant says that
this affidavit and agreement are made in order to introduce the Company to
extend credit and other financial accommodations to Affiant.

        IN CONSIDERATION THEREFOR, Affiant hereby agrees for Affiant and
Affiant's heirs, legal representatives and assigns that in case any of Affiant's
representations herein are materially false or misleading, or in the event that
Affiant breaches or violates any of his undertakings herein, Affiant agrees for
Affiant and Affiant's heirs, legal representatives and assigns to indemnify and
save harmless the Company, the Company's successors or assigns and the Company's
directors, officers and employees from and against any and all liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every nature
and character which they sustain or incur by reason of their reliance on any
such false or misleading representation, or due to any breach or violation by
Affiant.

                                       C-1

<PAGE>

                                                                EXHIBIT 10.4-C

        All obligations of the Affiant hereunder shall be binding upon the
Affiant, his heirs, legal representatives, successors or assigns.

        IN WITNESS WHEREOF, the Affiant has executed this document as of the
date first written above.

WITNESSES:

Signature:                                By:
          ---------------------------        -----------------------------------
                                             Wendelin Karl Johannes Scharbach

Print Name:                               Print Name:
           --------------------------                ---------------------------

Signature:
          ---------------------------

Print Name:
           --------------------------

                                       C-2<PAGE>

                                                                    EXHIBIT 10.5

                       AMENDED AND RESTATED LOAN AGREEMENT

        THIS AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement") is dated and
entered into as of June 20, 2000, by and between FARO Technologies, Inc., a
Florida corporation ("Lender"), whose current mailing address is 125 Technology
Park, Lake Mary, Florida 32746, and Siegfried Kurt Buss, an individual resident
of the Federal Republic of Germany ("Borrower"), whose current mailing address
is Erich Kaestner Strasse 73, Ditzingen, Hirschlanden 71254.

        WHEREAS, on May 15, 1998, Lender acquired CATS computer aided
technologies, Computeranwendungen in der Fertigungssteuerung GmbH, a limited
liability company under the laws of the Federal Republic of Germany ("CATS").
Borrower was a holder of Quotas in CATS.

        WHEREAS, pursuant to a Loan Agreement dated August 2, 1999 between
Lender and Borrower (the "Original Loan Agreement"), Lender has agreed to loan
to Borrower an amount equal to his tax obligation to the German tax authority in
connection with the acquisition of CATS. The maximum amount of the loans is
estimated to be approximately $2 million.

        WHEREAS, the German tax authority have indicated to Borrower that they
would be willing to issue a preliminary tax assessment for fiscal year 1998
based on a value of U.S. $4.875 per share of Common Stock of Lender (using an
exchange rate of U.S. Dollars to Deutsche Marks ("DM") of 1:1.8403 for
May 1999).

        WHEREAS, Borrower received 458,334 shares of Lender common stock as part
of the purchase price for the acquisition of CATS. Using a price of $4.875 per
share of Lender common stock, the value of the shares of Lender common stock
received by Borrower would equal DM 4,111,926. The tax payable with respect to
such shares based on such value would equal DM 1,159,733.36.

        WHEREAS, based on a stock price per share of Lender common stock on
May 15, 1998 of U.S. $11.125. the value of the shares of Lender common stock
received by Borrower would equal would equal DM 9,048,634 (using an exchange
rate of U.S. Dollars to DM of 1:1.7746 for May 1998). The tax payable with
respect to such shares based on such value would equal DM 2,552,683.73.

        WHEREAS, because the tax assessment received by Borrower is only
preliminary, the German tax authority could at any time revise the tax
assessment based on the price per share of Lender common stock on May 15, 1998.

        WHEREAS, the parties wish to amend the Original Loan Agreement to
provide that Lender will loan to Borrower an initial amount of DM 1,159,733.36
resulting from the preliminary tax assessment as provided for in the Original
Loan Agreement, and that Lender will pay an additional amount of DM 1,392,950.37
(DM 2,552,683.73 less DM 1,159,733.36) into an escrow account to cover possible
additional taxes payable because of a higher value of the 458,334 shares of
Lender common stock issued to Borrower in connection with the acquisition of

<PAGE>

                                                                  EXHIBIT 10.5

CATS. The amount paid into escrow would increase the amount of the Loan under
this Agreement if distributed to pay additional taxes.

        WHEREAS, once the German tax authority have issued a final tax
assessment, the amount in the escrow account will be used to pay such amount of
additional tax or, to the extent the amount in the escrow account is not needed
to pay additional taxes, will be repaid to Lender. To the extent the amount in
the escrow account is used to pay additional taxes, such amount would be
evidenced by a new promissory note issued by Borrower to Lender and such note
would be secured by shares of common stock of Lender.

        WHEREAS, this Agreement amends and restates the Original Loan Agreement.

        In consideration of the loan described below and the mutual covenants
and agreements contained herein, Borrower and Lender agree as follows:

        1.      LOANS.

                A.      Initial Loan.

                i.      Lender hereby agrees to make a loan to Borrower in the
                principal amount of DM 1,159,733.36 (the "Initial Loan").

                ii.     The amount of the Initial Loan is equal to the tax
                payable by Borrower (based on the preliminary tax assessment
                issued to Borrower by the German tax authority for fiscal year
                1998, which used a value of U.S. $4.875 per share of Lender
                common stock, and based on an exchange rate of U.S. Dollars to
                DM of 1:1.8403 for May 1999) with respect to Borrower's receipt
                of 458,334 shares of Lender common stock in connection with
                Lender's acquisition of CATS.

                iii.    To evidence his obligation to repay the Initial Loan,
                and to otherwise induce Lender to make the Initial Loan,
                Borrower shall execute and deliver to Lender a Promissory Note,
                Stock Pledge Agreement, Affidavit and Indemnity Agreement, Stock
                Power and UCC-1 Financing Statement in the forms attached hereto
                a Exhibits A, B, C, D and E, respectively (together, the "Loan
                Documents") with respect to the Initial Loan at such time that
                the Initial Loan is made.

                iv.     Lender will be obligated to make the Initial Loan to
                Borrower within three (3) business days after Borrower presents
                written evidence to Lender that the German tax authority has
                requested payment of the tax obligations described in Section 4
                of this Agreement.

                B.      Additional Loan.

                i.      Lender hereby agrees to make an additional loan to
                Borrower in the principal amount of up to DM 1,392,950.37 (the
                "Additional Loan"), as is necessary to enable Borrower to
                satisfy his tax obligations to the German tax authority as a
                result of Borrower's receipt of 458,334 shares of Lender common

                                       -2-

<PAGE>

                                                                  EXHIBIT 10.5

                stock of the Lender that Borrower received in connection with
                Lender's acquisition of CATS. Lender will be obligated to make
                the Additional Loan only if the German tax authority issues a
                final tax assessment that assesses a greater tax obligation on
                Borrower than the preliminary tax assessment issued to Borrower
                by the German tax authority for fiscal year 1998 with respect to
                Borrower's receipt of 458,334 shares of Lender common stock in
                connection with Lender's acquisition of CATS.

                ii.     The maximum amount of the Additional Loan is equal to
                (i) DM 2,552,683.73, which is the tax payable by Borrower (based
                on a stock price per share of Lender common stock on May 15,
                1998 of U.S. $11.125 and using an exchange rate of U.S. Dollars
                to DM of 1:1.7746 for May 1998) with respect to Borrower's
                receipt of 458,334 shares of Lender common stock in connection
                with Lender's acquisition of CATS, less (ii) the amount of the
                Initial Loan.

                iii.    To evidence his obligation to repay the Additional Loan,
                and to otherwise induce Lender to make the Additional Loan,
                Borrower shall execute and deliver to Lender the Loan Documents
                with respect to the Additional Loan at such time as the
                Additional Loan is made.

                iv.     To secure Lender's obligation pursuant to this Agreement
                to make the Additional Loan to Borrower, Lender shall deposit
                U.S. $679,487.99 (DM 1,392,950.37 divided by 2.05, the exchange
                rate of U.S. Dollars to DM on June 9, 2000) in an escrow account
                (the "Escrow Account") with Firstar Bank Milwaukee, N.A. (the
                "Escrow Agent") pursuant to an Escrow Agreement dated on or
                about the date of this Agreement among Lender, Borrower, and the
                Escrow Agent, a copy of which is attached as Exhibit F to this
                Agreement. Any interest on the funds in the Escrow Account shall
                be paid to the Lender.

                v.      All funds shall remain in the Escrow Account until the
                earlier of (i) July 1, 2004 or (ii) the date that Borrower
                presents written evidence to Lender and the Escrow Agent that
                the German tax authority has requested payment of the final tax
                assessment with respect to the tax obligations for the 458,334
                shares of Lender common stock that Borrower received in
                connection with Lender's acquisition of CATS. Lender will be
                obligated to make the Additional Loan, and funds from the Escrow
                Account shall be paid to Borrower to fund the Additional Loan,
                within three (3) business days after Borrower presents written
                evidence to Lender that the German tax authority has requested
                payment of the tax obligations described in Section 4 of this
                Agreement.

                vi.     The Escrow Agent is obligated to pay to the Borrower
                funds from the Escrow Account (without permission of the Lender)
                as are necessary to enable Borrower to satisfy his tax
                obligations to the German tax authority as described in Section
                4 of this Agreement upon presentation by Borrower to the Escrow
                Agent of (i) copies of the Loan Documents for the Additional
                Loan executed by Borrower and delivered to Lender, and (ii)
                written evidence to Lender that the

                                       -3-

<PAGE>

                                                                  EXHIBIT 10.5

                German tax authority has requested payment of the tax
                obligations described in Section 4 of this Agreement.

                vii.    Any funds remaining in the Escrow Account after
                        July 1, 2004 or any funds not needed to pay the final
                        tax assessment with respect to the tax obligations for
                        the 458,334 shares of Lender common stock that Borrower
                        received in connection with Lender's acquisition of CATS
                        shall be returned immediately to Lender.

                C.      Definition of the Loans. The Initial Loan and the
Additional Loan are each referred to as a "Loan" and collectively are referred
to as the "Loans."

        2.      LENDER'S COMMITMENT. Lender's obligation to extend the Loans to
Borrower is a valid, legal, irrevocable and binding corporate obligation which
shall not be rescinded or withdrawn in the event of a change of Lender's present
management or ownership.

        3.      TERMS AND CONDITIONS OF LOAN. The Loans shall be governed by the
following terms and conditions in addition to all terms and conditions set forth
in the Loan Documents.

                A.      Payment.

                i.      Notwithstanding any contrary provision set forth herein
                or in any document related hereto, Borrower shall be obligated
                to pay all outstanding principal, together with all then accrued
                and unpaid interest under each Loan, on or before the earlier of
                (a) the end of the three year period that commences on the date
                the Borrower executes and delivers the Loan Documents to Lender
                with respect to each Loan, or (b) that date when the preceding
                five (5) trading days of the Lender's common stock yields an
                average closing price of $11.34 per share (each such date
                hereinafter referred to as the "Maturity Date"). On such
                Maturity Date as defined in Section 3A(i)(b), it shall be within
                Borrower's discretion to repay the Loans either in cash, or, in
                lieu thereof, with shares of the common stock of Lender at an
                agreed upon price of $11.34 per share. For the purpose of
                repaying the Loans with shares of the Lender's common stock as
                provided for in this Section 3A(i), Borrower shall be required
                to utilize that portion of the Collateral (as defined in Section
                3E below) which is equal in value to the amount of Loans being
                repaid.

                ii.     Notwithstanding the foregoing, in the event a Loan is
                still outstanding at end of the three year period that commences
                on the date Borrower executes and delivers the Loan Documents to
                the Lender with respect to such Loan, Borrower shall have the
                option of either: (a) requiring Lender to renew or extend the
                Loan for an additional term of three (3) years or (b) canceling
                the Loan, effective as of the three year anniversary date, by
                providing Lender with written notice in accordance with the
                provisions of Section 10 below, and in exchange for such
                cancellation Borrower shall irrevocably authorize Lender to
                dispose of the

                                       -4-

<PAGE>

                                                                  EXHIBIT 10.5

                Collateral in accordance with the terms and conditions of
                Section 9 below. The parties hereby agree that the three year
                anniversary date shall be the date which coincides with the end
                of the three year period that commences on the date Borrower
                executes and delivers the Loan Documents to the Lender with
                respect to a Loan, and if Borrower elects to cancel such Loan
                effective as of such date, the date shall hereinafter be
                referred to as the "Anniversary Cancellation Date." If on the
                Anniversary Cancellation Date, the value of the Collateral is
                less than the sum of: (i) the outstanding principal balance of
                the Loan; (ii) any accrued but unpaid interest on the Loan;
                (iii) any fees authorized and due and owing to Lender pursuant
                to the Promissory Note with respect to the Loan; and (iv) any
                costs and expenses authorized and due and owing to Lender
                pursuant to the Promissory Note with respect to the Loan,
                Borrower shall not be required to pay to Lender the amount by
                which the sum of items (i) through (iv) exceeds the value of the
                Collateral. On the other hand, if on the Anniversary
                Cancellation Date, the value of the Collateral exceeds the sum
                of items (i) through (iv), Lender shall be required to release
                and return to Borrower, free and clear of all liens and
                encumbrances, the portion of the Collateral which exceeds the
                sum of items (i) through (iv). For purposes of determining the
                value of the Collateral on the Anniversary Cancellation Date,
                the parties shall utilize the closing price of the shares of
                Lender's common stock (as traded on the NASDAQ National Market)
                on that particular date, or, if that date is not a trading day
                on the NASDAQ National Market, the immediately preceding trading
                day.

                iii.    All Shares used by Borrower to repay the Loan pursuant
                to the provisions of Section 3A(i) above, as well as all Shares
                comprising the Collateral used by Borrower to compensate Lender
                for the cancellation of the Loan pursuant to the provisions of
                Section 3A(ii) above, shall be subject to sale by Lender on
                Borrower's behalf in accordance with the terms and conditions of
                Section 9 below, and Borrower shall cooperate with Lender in
                effecting any such sale.

                B.      Interest.

                i.      Except as otherwise provided in Section 5 of the
                Promissory Note, interest shall accrue on the outstanding
                principal balance of each Loan at a rate that is equal to the
                sum of (a) the EURIBOR rate that was in effect at 10:00 A.M. on
                August 2, 1999 (and which is applicable to loans with a maturity
                date of one year); and (b) 1.57%. Interest on the outstanding
                principal balance of the Loans shall be paid annually, on the
                last business day in December of each year, until the entire
                principal is paid.

                ii.     Interest shall be calculated on the basis of a 360 day
                year based upon the actual number of days elapsed. No interest
                shall accrue on a Loan until the Loan is made to Borrower, and
                no interest shall accrue after the Maturity Date (as defined in
                Section 3A(i) above), the Anniversary Cancellation Date (as
                defined in Section 3A(ii) above), or the Cancellation Date (as
                defined in Section 8 below).

                                       -5-

<PAGE>

                                                                  EXHIBIT 10.5

                iii.    The total liability of Borrower under the Loans for
                payment of interest shall not exceed any limitations imposed on
                the payment of interest by applicable usury laws. If any
                interest is received or charged in excess of that amount,
                Borrower shall be entitled to a refund of the excess.

                iv.     Upon the occurrence of an Event of Default under a
                Promissory Note, interest shall accrue at the Default Rate
                thereunder set forth notwithstanding the provisions of this
                section.

                C.      Prepayment. The Borrower shall be entitled to prepay the
Loans in whole or in part at any time without penalty.

                D.      Application of Payments. All payments under the
Promissory Note shall be applied first to the Lender's costs and expenses, then
to fees authorized thereunder, then to interest and then to principal.

                E.      Grant of Security Interest. To secure the due and
punctual payment of the Loans and all of his other liabilities to Lender arising
in connection with the Loans, and all reasonable costs and expenses incurred by
Lender in connection with enforcement or collection of the Loans or any
liability of Borrower in connection therewith (including reasonable legal fees
and expenses incurred in trial, appellate, bankruptcy, and judgment-execution
proceedings) and all reasonable costs and expenses incurred in connection with
realizing on the value of the Collateral (including appraisal fees,
broker-dealer fees, and legal fees incurred in trial, appellate, bankruptcy, and
judgment-execution proceedings), Borrower shall pledge, hypothecate, assign,
convey and grant to Lender a first lien and security interest (collectively, the
"Security Interest") in the following:

                i.      Such number of shares of Lender common stock (the
                "Shares") which is arrived at as a result of dividing (i) the
                original principal sum of the Note (stated in U.S. dollars) by
                (ii) US $6.375; the denominator of US $6.375 being the closing
                price of each share of Lender's common stock (as traded on the
                NASDAQ National Market) on March 31, 1999.

                ii.     All dividends, additional shares or other property or
                securities that are receivable or otherwise distributable at any
                time and from time to time in respect of, or in exchange or
                substitution for, the Shares and all profits therefrom; and

                iii.    All proceeds of the foregoing.

        As used herein, the term "Collateral" refers to all the property
described in this Section 3E, as well as any portion or any interest in it.

                4.      PURPOSE OF LOAN. The purpose of the Loan will be to
enable Borrower to timely satisfy his obligation to pay certain taxes in the
Federal Republic of Germany in connection with Borrower's sale on May 15, 1998
of his Quotas in CATS. As part of the consideration (the "Consideration") paid
to Borrower in connection with his sale on May 15, 1998 of his Quotas in CATS,
Borrower received 458,334 shares of Lender common stock. The

                                       -6-

<PAGE>

                                                                  EXHIBIT 10.5

purpose of the Loans is to pay the amount of taxes that Borrower is required to
pay to the German tax authority in connection with and as a result of the
458,334 shares of Lender common stock received by Borrower on May 15, 1998 in
connection with the acquisition of CATS.

        5.      REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to lender as follows:

                A.      Authority and Compliance. Borrower has full power and
authority to execute and deliver this Agreement and the Loan Documents and to
incur and perform the obligations provided for therein. No consent or approval
of any public authority or other third party is required as a condition to the
validity of this Agreement or any of the Loan Documents, and Borrower is in
compliance with all laws and regulatory requirements to which they are subject.

                B.      Binding Agreement. This Agreement and the Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms.

                C.      Litigation. There is no proceeding involving Borrower
pending or, to the knowledge of Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as disclosed to
Lender in writing and acknowledged by Lender prior to the date of this
Agreement.

                D.      No Conflicting Agreements. There is no charter, bylaw,
stock provision, partnership agreement or other document pertaining to the power
or authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting his property, which would
conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the Loan Documents.

                E.      Ownership of Collateral. Borrower has good title to the
collateral that will secure the Loans, and the collateral is, and will be kept,
free and clear of liens, except those to be granted to Lender pursuant to the
Stock Pledge Agreement attached hereto in the form of Exhibit B.

        6.      DEFAULT. Borrower shall be in default under this Agreement and
under each of the Loan Documents if he shall default in the payment of any
amounts due and owing to Lender pursuant to the Loan Documents or should he fail
to timely and properly observe, keep or perform any term, covenant, agreement or
condition in any Loan Document or in any other loan agreement, promissory note,
security agreement, deed of trust, deed to secure debt, mortgage, assignment or
other contract securing or evidencing payment of any indebtedness of Borrower to
Lender or any affiliate or subsidiary of Lender.

        7.      REMEDIES UPON DEFAULT. If an event of default shall occur,
Lender shall have all rights, powers and remedies available under each of the
Loan Documents as well as all rights and remedies available at law or in equity.

                                       -7-

<PAGE>

                                                                  EXHIBIT 10.5

        8.      BORROWER'S OPTION TO CANCEL LOAN. Notwithstanding anything to
the contrary in any document or agreement between Borrower and Lender, Borrower
shall have the option, in his sole discretion, at anytime, to cancel the Loans,
and in exchange for such cancellation Borrower shall irrevocably authorize
Lender to dispose of the Collateral in accordance with the terms and conditions
of Section 9 below. For purposes of this Section 8, the "Date of Cancellation"
shall be the date on which Lender receives a written notice from Borrower to
cancel a Loan. The written notice shall be furnished in accordance with the
notice provisions of Section 10 below. Provided, however, that if on the Date of
Cancellation, the value of the Collateral is less than the sum of (i) the
outstanding principal balance of such Loan; (ii) any accrued but unpaid interest
on such Loan; (iii) any fees authorized and due and owing to Lender pursuant to
the Promissory Note; and (iv) any costs and expenses authorized and due and
owing to Lender pursuant to the Promissory Note, Borrower shall be required to
pay to Lender the amount by which the sum of items (i) through (iv) listed in
this Section 8 exceeds the value of the Collateral. Borrower shall have the
option of making the payment herein provided for to Lender in either additional
cash or additional shares of Lender's issued and outstanding common stock. If on
the Date of Cancellation, the value of the Collateral exceeds the sum of items
(i) through (iv) listed in this Section 8, Lender shall be required to release
and return to Borrower, free and clear of all liens and encumbrances, the
portion of the Collateral which exceeds the sum of items (i) through (iv) of
this Section 8. For purposes of determining the value of the Collateral and
additional shares on the Date of Cancellation, the parties shall utilize the
closing price of the shares of Lender's common stock (as traded on the NASDAQ
National Market) on the Date of Cancellation. Any Shares used by Borrower to
compensate Lender in consideration for the cancellation of the Loan pursuant to
the provisions of this Section 8 shall be subject to sale by Lender on
Borrower's behalf pursuant to the terms and conditions of Section 9 below, and
Borrower shall cooperate with Lender in effecting any such sale.

        9.      MECHANISM FOR SALE OF SHARES. The Shares to be pledged by
Borrower to Lender pursuant to the Stock Pledge Agreement will, in part, consist
of a portion of the 343,750 shares of Lender common stock registered with the
United States Securities and Exchange Commission (the "SEC") pursuant to that
certain S-1 Registration Statement dated and filed with the SEC on June 22, 1998
(the "Registered Shares"). The balance of the Shares to be pledged to Lender by
Borrower pursuant to the Stock Pledge Agreement shall consist of shares of
Lender's common stock that have not been registered with the SEC (the
"Non-registered Shares"). It is also contemplated that if Borrower is required
to utilize additional shares to compensate Lender pursuant to the provisions of
Section 8 above or under any of the Loan Documents, Borrower will utilize
Registered Shares and/or Non-registered Shares. If, in order to satisfy any of
Borrower's obligations or commitments pursuant to any Loan Document, a sale must
be made of any or all of the Registered Shares or Non-registered Shares pledged
or otherwise delivered by Borrower to Lender, Borrower shall authorize Lender to
make such sale as an agent of Borrower and on Borrower's behalf. Any sale of
Registered Shares as provided for in this Section 9 shall be made pursuant to
the S-1 Registration Statement, and shall be deemed to be a sale by Borrower
through his duly appointed and authorized agent. Any sale of Non-Registered
Shares as provided for in this Section 9 shall be made pursuant to and in
satisfaction of the requirements of Rule 144 promulgated by the SEC under the
Securities Act of 1933, as amended, and shall be deemed to be a sale by Borrower
through his duly appointed and

                                       -8-

<PAGE>

                                                                  EXHIBIT 10.5

authorized agent. Lender shall have the right to keep and maintain custody of
any and all proceeds of any sale of Registered Shares or Non-registered Shares
in satisfaction of any sum due and owing to Lender pursuant to the Loan
transaction. Borrower's appointment of Lender as his agent for purposes of this
Section 9, and the authorization to be granted to Lender to sell Registered
Shares and/or Non-registered Shares on behalf of Borrower, shall be set forth in
the Promissory Note, Stock Pledge Agreement and Stock Power delivered to Lender
along with the pledged Shares (and in the Stock Power alone, in the case of any
additional shares delivered to Borrower). Further, Borrower shall covenant and
agree to make all such reasonable arrangements, do and perform all such
reasonable acts and things, execute and deliver all such certificates, documents
and other instruments, and to take such further reasonable actions as Lender may
deem necessary or advisable to effect the sale of Registered Shares pursuant to
the S-1 Registration Statement, or Non-registered Shares in compliance with the
requirements of Rule 144, as the case may be, as Borrower's agent and on
Borrower's behalf.

        10.     NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing, and may be by means of facsimile transmission,
delivered to the other party at the following address:

                    If to Lender:

                    FARO Technologies, Inc.
                    125 Technology Park
                    Lake Mary, Florida  32746
                    Telecopy: (407) 333-4181

                    Attention:  Gregory A. Fraser

                    With a copy to:

                    Foley & Lardner
                    100 North Tampa St., Suite 2700
                    Tampa, Florida 33602
                    Telecopy: (813) 221-4210

                    Attention:  Martin A. Traber

                    If to Borrower:

                    Siegfried Kurt Buss
                    Erich Kaestner Strasse 73,
                    Ditzingen, Hirschlanden 71254
                    Telecopy:  011-49-711-2222-444

                                       -9-

<PAGE>

                                                                  EXHIBIT 10.5

                    With a copy to:

                    Hasche Eschenlohr Peltzer Riesenkampff Fischotter
                    Neidenau 68
                    60325 Frankfurt/Main
                    Germany
                    Telecopy: 011-49-69-71-701-230

                    Attention:  Thomas Link

or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid; (ii) if
electronically transmitted, the next business day after transmission (and the
sender shall bear the burden of proof of delivery), or (iii) if sent by any
other means, upon delivery.

        11.     COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Lender immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees) incurred
by Lender in connection with Lender's enforcement of its rights hereunder or
under the Loan Documents.

        12.     MISCELLANEOUS. Borrower and Lender further covenant and agree as
follows, without limiting any requirement of any of the Loan Documents:

                A.      Cumulative Rights and No Waiver. Each and every right
granted to Lender under any Loan Document, or allowed it by law or equity shall
be cumulative of each other and may be exercised in addition to any and all
other rights of Lender, and no delay in exercising any right shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.

                B.      Legal Matters. The validity, construction, enforcement,
and interpretation of this Agreement shall be governed by the laws of the State
of Florida and the United States of America, without regard to principles of
conflict of laws. Each party to this Agreement (a) consents to the personal
jurisdiction of the state and federal courts having jurisdiction in Seminole
County, Florida, (b) stipulates that the proper, exclusive, and convenient venue
for any legal proceeding arising out of this Agreement is Seminole County,
Florida, for state court proceedings, and the Middle District of Florida,
Orlando Division, for federal district court proceedings, and (c) waives any
defense, whether asserted by a motion or pleading, that Seminole County,
Florida, or the Middle District of Florida, Orlando Division, is an improper or
inconvenient venue. In any mediation, arbitration, or legal proceeding arising
out of this Agreement, the losing party shall reimburse the prevailing party, on
demand, for all costs

                                      -10-

<PAGE>

                                                                    EXHIBIT 10.5

incurred by the prevailing party in enforcing, defending, or prosecuting any
claim arising out of this Agreement, including all fees, costs, and expenses of
experts, attorneys, witnesses, collection agents, and supersedeas bonds, whether
incurred before or after demand or commencement of legal proceedings, and
whether incurred pursuant to trial, appellate, mediation, arbitration,
bankruptcy, administrative, or judgment-execution proceedings.

                C.      Loan to be deemed repaid. A Loan shall be deemed to have
been repaid effective as of the earliest of: (i) the date on which Borrower
prepays such Loan (as allowed under Section 3C above); (ii) the Maturity Date
(as defined in Section 3A(i) above); (iii) the Anniversary Cancellation Date (as
defined in Section 3A(ii) above); or (iv) the Cancellation Date (as defined in
Section 8 above), so long as by the particular date Lender has received from
Borrower any combination of cash and/or shares of Lender's stock sufficient to
cover the then outstanding Loan obligations in accordance with the provisions of
this Agreement. From and after the repayment date, Borrower shall have no
obligations to Lender with respect to a Loan pursuant to or under this Agreement
or the Loan Documents, except for Borrower's obligation to cooperate with lender
in disposing of the Collateral Shares (and any additional shares delivered to
Lender) pursuant to the provisions of Section 9 above.

                D.      Amendment. No modification, consent, amendment or waiver
of any provision of this Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Lender, and then shall be effective only in the specified instance
and for the purpose for which given. This Agreement is binding upon Borrower,
his heirs, successors and assigns, and inures to the benefit of Lender, its
successors and assigns; however, no assignment or other transfer of Borrower's
rights or obligations hereunder shall be made or be effective without Lender's
prior written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Agreement.

                E.      Partial Invalidity. The unenforceability or invalidity
of any provision of this Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or unenforceability of
any provision of any Loan Document to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to other
persons or circumstances.

                F.      This Agreement amends and restates the Original Loan
Agreement in its entirety, and the Original Loan Agreement is no longer in
effect.

        13.     NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

        To the extent permitted by law, the Borrower agrees to and does hereby
waive trial by jury in any action, proceeding, or counterclaim brought by either
the Borrower or the Lender on any matters whatsoever arising out of or in any
way connected with this Agreement or any claim

                                      -11-

<PAGE>

                                                                    EXHIBIT 10.5

of damage resulting from any act or omission of the Borrower or Lender or either
of them in any way connected with this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.

                                          LENDER

                                          FARO Technologies, Inc.

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

                                          Name:
                                               ---------------------------------

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

                                          BORROWER

                                          --------------------------------------
                                          Siegfried Kurt Buss

                                      -12-

<PAGE>

                                                                  EXHIBIT 10.5-A

                                 PROMISSORY NOTE

                                U.S. $565,723.59

Karlsruhe                                                           July 5, 2000
Federal Republic of Germany

        FOR VALUE RECEIVED, the undersigned, Siegfried Kurt Buss, an individual
resident of the Federal Republic of Germany (the "Maker"), whose current mailing
address is Erich Kaestner Strasse 73, Ditzingen, Hirschlanden 71254, hereby
promises to pay to the order of FARO Technologies Inc., a Florida corporation
(the "Payee"), whose current business address is 125 Technology Park, Lake Mary,
FL 32746, the principal sum of Five Hundred Sixty-five Thousand Seven Hundred
Twenty-three and 59/100 United States Dollars (U.S. $565,723.59), together with
interest on the outstanding principal balance hereof at the rate provided for
herein. This note (the "Note") shall be governed by the following provisions:

        1.      Payment.

                A.      Notwithstanding any contrary provision set forth herein
or in any document related hereto, Maker shall be obligated to pay all
outstanding principal, together with all then accrued and unpaid interest under
the Note, on or before the earlier of (a) July 5, 2003 or (b) that date when the
preceding five (5) trading days of the Payee's common stock yields an average
closing price of $11.34 per share (each such date hereinafter referred to as the
"Maturity Date"). On such Maturity Date as defined in Section 1(i)(b), it shall
be within Maker's discretion to repay the Note either in cash, or, in lieu
thereof, with shares of the common stock of Payee at an agreed upon price of
$11.34 per share. For the purpose of repaying the Note with shares of the
Payee's common stock, Maker shall be required to utilize that portion of the
Collateral (as described in Section 10 below) which is equal in value to the
Note obligation being repaid.

                B.      Notwithstanding the foregoing, in the event the Note is
still outstanding as of July 5, 2003, Maker shall have the option of either: (a)
requiring Payee to renew or extend the Note for an additional term of three (3)
years or (b) canceling the Note, effective as of that date, by providing Payee
with written notice in accordance with the notice provisions of the Loan
Agreement, and in exchange for such cancellation Maker shall irrevocably
authorize Payee to dispose of the Collateral in accordance with the terms and
conditions of Section 9 below. If Maker elects to cancel the Note effective as
of July 5, 2003, that date shall hereinafter be referred to as the "Anniversary
Cancellation Date." If on the Anniversary Cancellation Date, the value of the
Collateral is less than the sum of: (i) the outstanding principal balance of the
Note; (ii) any accrued but unpaid interest on the Note; (iii) any fees
authorized and due and owing to Payee pursuant to the Note; and (iv) any costs
and expenses authorized and due and owing to Payee pursuant to the Note, Maker
shall not be required to pay to Payee the amount by which the

                                       A-1

<PAGE>

                                                                  EXHIBIT 10.5-A

sum of items (i) through (iv) exceeds the value of the Collateral. On the other
hand, if on the Anniversary Cancellation Date, the value of the Collateral
exceeds the sum of items (i) through (iv), Payee shall be required to release
and return to Maker, free and clear of all liens and encumbrances, the portion
of the Collateral which exceeds the sum of items (i) through (iv). For purposes
of determining the value of the Collateral on the Anniversary Cancellation Date,
the parties shall utilize the closing price of the shares of Payee's common
stock (as traded on the NASDAQ National Market) on that particular date, or, if
that date is not a trading day on the NASDAQ National Market, the immediately
preceding trading day.

                C.      All Shares used by Maker to repay the Note pursuant to
the provisions of Section 1(i) above, as well as all Shares comprising the
Collateral used by Maker to compensate Payee for cancellation of the Note
pursuant to the provisions of Section 1(ii) above, shall be subject to sale by
Payee on Maker's behalf in accordance with the terms and conditions of Section 9
below, and Maker shall cooperate with Payee in effecting any such sale.

        2.      Interest.

                A.      Except as otherwise provided in Section 5 below,
interest shall accrue on the outstanding principal balance hereof at a rate per
annum equal to the sum of (a) the EURIBOR rate that was in effect at 10:00 A.M.
on August 2, 1999 (and which is applicable to loans with a maturity date of one
year); and (b) 1.57% percent (1.57%). Interest on the outstanding principal
balance of the Note shall be paid annually, on the last business day in December
of each year, until the entire principal is paid.

                B.      Interest shall be calculated on the basis of a 360 day
year based upon the actual number of days elapsed. No interest shall accrue
after the Maturity Date (as defined in Section 1(i) above), the Anniversary
Cancellation Date (as defined in Section 1(ii) above), or the Cancellation Date
(as defined in Section 8 below).

                C.      The total liability of the Maker for payment of interest
shall not exceed any limitations imposed on the payment of interest by
applicable usury laws. If any interest is received or charged by any holder
hereof in excess of that amount, the Maker shall be entitled to a refund of the
excess.

                D.      Upon the occurrence of an Event of Default hereunder,
interest shall accrue at the Default Rate hereinafter set forth notwithstanding
the provisions of this section.

        3.      Prepayment. The Maker shall be entitled to prepay this Note in
whole or in part at any time without penalty.

        4.      Application of Payments. All payments hereunder shall be applied
first to the Payee's costs and expenses, then to fees authorized hereunder, then
to interest and then to principal.

        5.      Default. An Event of Default shall be deemed to have occurred
hereunder upon the occurrence of any of the following events: (a) the Maker's
failure to pay any principal, interest or other amounts hereunder as and when
due and payable; (b) the commencement of any

                                       A-2

<PAGE>

                                                                  EXHIBIT 10.5-A

bankruptcy or insolvency proceedings by the Maker or, if commenced against the
Maker and not discharged within 60 days, or if an order for relief is entered by
the appropriate bankruptcy court; or (c) material falsity in any certificate,
statement, representation, warranty or audit at any time furnished to the Payee
by or on behalf of the Maker and including any omission to disclose any
substantial contingent or liquidated liabilities or any material adverse change
in any facts disclosed by any certificate, statement, representation, warranty
or audit furnished to the Payee. If any Event of Default shall occur, all then
outstanding principal hereunder, all accrued and unpaid interest hereunder and
all other amounts payable under this Note shall be forthwith due and payable
without presentment, further demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Maker. Upon the occurrence of any
Event of Default, the outstanding principal of this Note, and any accrued and
unpaid interest, shall bear interest at a rate of either four percent (4%) per
annum above the rate specified in subparagraph 2(i) above after default until
paid or, if such rate is usurious under the laws of Florida, then at the highest
legal rate permissible thereunder (the "Default Rate").

        6.      Expenses. The Maker agrees to pay the Payee all costs incurred
by it in connection with the collection of this Note. Such costs include,
without limitation, fees for the services of counsel and legal assistants
employed to collect this Note, whether or not suit be brought, and whether
incurred in connection with collection, trial, appeal or otherwise. The Maker
further agrees to indemnify and hold the Payee harmless against liability for
the payment of state documentary stamp taxes, intangible taxes or other taxes
(including interest and penalties, if any), excluding income or service taxes of
the Payee, which may be determined to be payable with respect to this
transaction.

        7.      Late Charge. The Maker shall pay a late charge on each and every
payment due hereunder and not received by the Payee within ten (10) days after
it is due. The amount of the late charge shall in each instance equal the
greater of: (a) $100.00; or (b) five percent (5.0%) of the delinquent payment.
The late charge is not a penalty, but liquidated damages to defray
administrative and related expenses due to such late payment. The late charge
shall be immediately due and payable and shall be paid by the Maker to the Payee
without notice or demand. Further, the acceptance of a late payment shall not
constitute a waiver of any default then existing or thereafter arising under
this Note.

        8.      Maker's Option To Cancel Note. Notwithstanding anything to the
contrary in any document or agreement between Maker and Payee, Maker shall have
the option, in his sole discretion, at anytime, to cancel the Note, and in
exchange for such cancellation Maker shall irrevocably authorize Payee to
dispose of the Collateral in accordance with the terms and conditions of Section
9 below. For purposes of this Section 8, the "Date of Cancellation" shall be the
date on which Payee receives a written notice from Maker to cancel the Note. The
written notice shall be furnished in accordance with the notice provisions of
the Loan Agreement. Provided, however, that if on the Date of Cancellation, the
value of the Collateral is less than the sum of (i) the outstanding principal
balance of the Note; (ii) any accrued but unpaid interest on the Note; (iii) any
fees authorized and due and owing to Payee pursuant to the Note; and (iv) any
costs and expenses authorized and due and owing to Payee pursuant to the Note,
Maker shall be required to pay to Payee the amount by which the sum of items (i)
through (iv) listed in this Section 8 exceeds the value of the Collateral. Maker
shall have the option of making the

                                       A-3

<PAGE>

                                                                  EXHIBIT 10.5-A

payment herein provided for to Payee in either additional cash or additional
shares of Payee's issued and outstanding common stock. If on the Date of
Cancellation, the value of the Collateral exceeds the sum of items (i) through
(iv) listed in this Section 8, Payee shall be required to release and return to
Maker, free and clear of all liens and encumbrances, the portion of the
Collateral which exceeds the sum of items (i) through (iv) of this Section 8.
For purposes of determining the value of the Collateral and additional shares on
the Date of Cancellation, the parties shall utilize the closing price of the
shares of Payee's common stock (as traded on the NASDAQ National Market) on the
Date of Cancellation. Any Shares used by Maker to compensate Payee in
consideration for the cancellation of the Note pursuant to the provisions of
this Section 8 shall be subject to sale by Payee on Maker's behalf pursuant to
the terms and conditions of Section 9 below, and Maker shall cooperate with
Payee in effecting any such sale.

        9.      Mechanism for Sale of the Shares. The Shares pledged by Maker to
Payee pursuant to the Stock Pledge Agreement consists, in part, of a portion of
the 343,750 shares of Payee common stock registered with the United States
Securities and Exchange Commission (the "SEC") pursuant to that certain S-1
Registration Statement dated and filed with the SEC on June 22, 1998 (the
"Registered Shares"). The balance of the Shares pledged to Payee by Maker
pursuant to the Stock Pledge Agreement consists of shares of Payee's common
stock that have not been registered with the SEC (the "Non-registered Shares").
It is also contemplated that if Maker is required to utilize additional shares
to compensate Payee pursuant to the provisions of Section 8 above or under any
of the Loan Documents, Maker will utilize Registered Shares and/or
Non-registered Shares. If, in order to satisfy any of Maker's obligations or
commitments pursuant to any Loan Document, a sale must be made of any or all of
the Registered Shares or Non-registered Shares pledged or otherwise delivered by
Maker to Payee, Maker hereby authorize Payee to make such sale as the Agent (as
defined below) of Maker and on Maker's behalf. Any sale of Registered Shares as
provided for in this Section 9 shall be made pursuant to the S-1 Registration
Statement, and shall be deemed to be a sale by Maker through his duly appointed
and authorized Agent. Any sale of Non-Registered Shares as provided for in this
Section 9 shall be made pursuant to and in satisfaction of the requirements of
Rule 144 promulgated by the SEC under the Securities Act of 1933, as amended,
and shall be deemed to be a sale by Maker through his duly appointed and
authorized Agent. Payee is hereby irrevocably granted the right to keep and
maintain custody of any and all proceeds of any sale of Registered Shares,
Non-registered Shares and other components of the Collateral in satisfaction of
any sum due and owing to Payee pursuant to the Loan transaction.

        10.     Security Interest. In accordance with the terms and conditions
of that certain Pledge Agreement dated as of the date hereof (the "Pledge
Agreement") between Payee and Maker, this Note is secured by the "Collateral"
described and defined in Section 1 of said Pledge Agreement. Without affecting
the liability of Maker hereunder, the Payee may, from time to time and without
notice, renew or extend the time for payment, accept partial payments, release
or impair any collateral security for payment of this Note, or agree not to sue
any party liable on it. Maker hereby waives presentment, demand, notice of
dishonor and protest.

                                       A-4

<PAGE>

                                                                  EXHIBIT 10.5-A

        11.     Miscellaneous.

                A.      The Note shall be deemed to have been repaid effective
as of the earliest of: (i) the date on which Maker prepays the Note (as allowed
under Section 3 above); (ii) the Maturity Date (as defined in Section 1(i)
above); (iii) the Anniversary Cancellation Date (as defined in Section 1(ii)
above); or (iv) the Cancellation Date (as defined in Section 8 above), so long
as by the particular date Payee has received from Maker any combination of cash
and/or shares of Payee's stock sufficient to cover the then outstanding Loan
obligations in accordance with the provisions of the Agreement and the Loan
Documents. From and after the repayment date, Maker shall have no obligations to
Payee pursuant to or under this Agreement or the Loan Documents, except for
Maker's obligation to cooperate with Payee in disposing of the Collateral Shares
(and any additional shares delivered to Payee) pursuant to the provisions of
Section 9 above.

                B.      Except as otherwise provided herein or in any other Loan
Document, the Maker shall make all payments hereunder in lawful money of the
United States of America at the Payee's principal address in the Federal
Republic of Germany or at such other place as the Payee may from time to time
designate in writing.

                C.      The remedies of the Payee as provided herein shall be
cumulative and concurrent, and may be pursued singly, successively or together,
at the sole discretion of the Payee and may be exercised as often as occasion
therefor shall arise.

                D.      No act of omission or commission of the Payee, including
specifically any failure to exercise any right, remedy or recourse, shall be
effective, unless set forth in a written document executed by the Payee and then
only to the extent specifically recited therein. A waiver or release with
reference to one event shall not be construed as continuing, as a bar to, or as
a waiver or release of any subsequent right, remedy or recourse as to any
subsequent event.

                E.      The validity, construction, enforcement, and
interpretation of this Note shall be governed by the laws of the State of
Florida and the United States of America, without regard to principles of
conflict of laws.

                F.      The Maker (a) consents to the personal jurisdiction of
the state and federal courts having jurisdiction in Seminole County, Florida,
(b) stipulates that the proper, exclusive, and convenient venue for any legal
proceeding arising out of this Note is Seminole County, Florida, for state court
proceedings, and the Middle District of Florida, Orlando Division, for federal
district court proceedings, and (c) waives any defense, whether asserted by a
motion or pleading, that Seminole County, Florida, or the Middle District of
Florida, Orlando Division, is an improper or inconvenient venue.

                G.      Maker's obligations to Payee hereunder and under the
other Loan Documents are secured by the Collateral, based on the fact that the
parties hereto have mutually agreed that the shares of stock pledged as
collateral are to be valued at $6.375 each as of the date hereof. For so long as
the value of the Collateral is sufficient to cover Maker's obligations to Payee
hereunder and under the other Loan Documents (regardless of whether such
obligations

                                       A-5

<PAGE>

                                                                  EXHIBIT 10.5-A

become due on the dates provided for herein or as a result of Maker's Default
hereunder or otherwise), then Maker shall not be personally liable to Payee, and
Payee shall not seek personal judgment against Maker or any of Maker's heirs or
assigns for such obligations. For so long as the value of the Collateral is
sufficient to cover Maker's obligations to Payee hereunder and under the other
Loan Documents, any judgment or decree in any action brought to enforce such
obligations shall be enforceable against Maker only to the extent of his
interest in the Collateral, and any such judgment or decree shall not be subject
to execution upon or be a lien upon the assets of Maker, other than his interest
in the Collateral. In determining whether the value of the Collateral is
sufficient to cover Maker's obligations to Payee on any particular day, the
parties shall utilize the closing price of the shares of Payee's common stock
(as traded on the NASDAQ National Market) on such day. By way of illustration
only: If the sum of (a) the outstanding principal balance of the Note; (b) any
accrued but unpaid interest on the Note; (c) any fees authorized and due and
owing to Payee pursuant to the Note; and (d) any costs and expenses authorized
and due and owing to Payee pursuant to the Note on any particular day is equal
to $1,000,000.00, then Maker shall not be personally liable to Payee if the
value of the Collateral on such day is also $1,000,000.00. If however, the value
of the Collateral on the hypothetical day is only $750,000.00 (perhaps due to a
closing price of less than $6.375 per share on such day), then maker shall be
personally liable for the shortfall of $250,000.00; and Payee shall be entitled
to seek personal judgment against Maker or any of Maker's heirs or assigns for
such shortfall. Accordingly, if the value of the Collateral exceeds Maker's
obligations to Payee on the hypothetical day, Payee shall be required to return
any such excess amount to Maker. Nothing contained in this paragraph shall
affect or limit the ability of Payee to enforce any of its rights or remedies
with respect to the Collateral.

                H.      In any mediation, arbitration, or legal proceeding
arising out of this Note, the losing party shall reimburse the prevailing party,
on demand, for all costs incurred by the prevailing party in enforcing,
defending, or prosecuting any claim arising out of this Note, including all
fees, costs, and expenses of experts, attorneys, witnesses, collection agents,
and supersedeas bonds, whether incurred before or after demand or commencement
of legal proceedings, and whether incurred pursuant to trial, appellate,
mediation, arbitration, bankruptcy, administrative, or judgement-execution
proceedings.

                I.      The term "Payee" as used herein shall mean any lawful
holder of this Note.

        To the extent permitted by law, the Maker agrees to and does hereby
waive trial by jury in any action, proceeding, or counterclaim brought by either
the Maker or the Payee on any matters whatsoever arising out of or in any way
connected with this Note or any claim of damage resulting from any act or
omission of the Maker or Payee or either of them in any way connected with this
Note.

                                       A-6

<PAGE>

                                                                  EXHIBIT 10.5-A

        IN WITNESS WHEREOF, the Maker has executed this Note as of the date
first written above.

WITNESSES:

Signature:                                By:
          ---------------------------        -----------------------------------
                                                   Siegfried Kurt Buss

Print Name:                               Print Name:
           --------------------------                ---------------------------

                                       A-7

<PAGE>

                                                                  EXHIBIT 10.5-A

                      MAKER'S APPOINTMENT OF PAYEE AS AGENT

        In consideration of the covenants contained above, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by both Maker and Payee, Maker hereby appoints Payee as his agent
and attorney-in-fact (the "Agent") to sell or otherwise dispose of (i) any
portion or all of the Collateral (as referred to in Section 10 above) including,
but not limited to, the Registered Shares and Non-registered Shares that are
components thereof; and (ii) any additional Registered Shares and/or
Non-registered Shares that Maker delivers to Payee pursuant to the terms and
conditions of the Loan Documents. Maker covenants and agrees to make all such
reasonable arrangements, do and perform all such reasonable acts and things,
execute and deliver all such certificates, documents and other instruments, and
to take such further reasonable actions as Payee may deem necessary or advisable
to effect the sale of Registered Shares pursuant to the S-1 Registration
Statement, or Non-registered Shares in compliance with the requirements of Rule
144, as the case may be, as Maker's Agent and on Maker's behalf. Maker grants
Payee full and unfettered authorization to dispose of the Collateral, and any
portion thereof, in accordance with the terms and conditions of Section 9 above,
as well as any other applicable provision of the Loan Documents. Further, Maker
agrees to indemnify and hold Payee harmless from liability for any and all
losses or damages asserted or suffered by any party as a result of Payer's
performance as Maker's Agent. Payee's appointment hereunder is irrevocable and
shall remain in full force and effect for so long as Maker has not satisfied all
of his obligations pursuant to the Loan Documents. Payee hereby accepts its
appointment as Maker's Agent under the terms and conditions hereof. The
appointment and authorization effected hereby, and the indemnification provided
for herein, shall (i) inure to the benefit of Payee, its successors and assigns;
and (ii) be binding upon Maker, his heirs and assigns.

                                          FARO Technologies, Inc.

                                          By:
-------------------------------------        -----------------------------------
Siegfried Kurt Buss
                                          Name:
                                               ---------------------------------

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

                                       A-8

<PAGE>

                                                                  EXHIBIT 10.5-B

                             STOCK PLEDGE AGREEMENT

Karlsruhe, Germany                                                  July 5, 2000

        THIS STOCK PLEDGE AGREEMENT (this "Agreement") is executed and made
effective as of July 5, 2000, by Siegfried Kurt Buss, an individual resident of
Germany ("Borrower") whose current mailing address is Erich Kaestner Strasse 73,
Ditzingen, Hirschlanden 71254 in favor of FARO Technologies, Inc., a corporation
organized and existing under the laws of the State of Florida ("FARO") whose
current mailing address is 125 Technology Park, Lake Mary, FL 32746.

                                    RECITALS

        WHEREAS, contemporaneously herewith, Borrower has made and delivered to
FARO a Promissory Note in the original principal amount of U.S. $565,723.59 (the
"Note"); and

        WHEREAS, to secure the prompt payment and performance of all of the
liabilities, obligations, and indebtedness of Borrower to FARO under the Note
(the "Liabilities"), Borrower desires to pledge, grant, hypothecate, assign, and
convey to FARO a first lien and security interest in and to: (a) the "Shares" of
FARO common stock described and defined on Schedule A attached hereto; and (b)
the property described in Sections 1(ii) and 1(iii) of this Agreement.

        NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, and agreements set forth herein, the
parties hereto hereby agree as follows:

        1.      Grant of Security Interest. To secure the due and punctual
payment of the Liabilities, and all reasonable costs and expenses incurred by
FARO in connection with enforcement or collection of the Liabilities (including
reasonable legal fees and expenses incurred in trial, appellate, bankruptcy, and
judgment-execution proceedings) and all reasonable costs and expenses incurred
in connection with realizing on the value of the security provided by this
Agreement (including appraisal fees, broker-dealer fees, and legal fees incurred
in trial, appellate, bankruptcy, and judgment-execution proceedings), Borrower
hereby pledges, grants, hypothecates, assigns, conveys, and grants to FARO a
first lien and security interest (collectively, the "Security Interest") in the
following:

                A.      all of the Shares listed on Schedule A to this
Agreement;

                B.      all dividends, additional shares or other property or
securities that are receivable or otherwise distributable at any time and from
time to time in respect of, or in exchange or substitution for, the Shares and
all profits therefrom; and

                C.      all proceeds of the foregoing.

                                       B-1

<PAGE>

                                                                  EXHIBIT 10.5-B

        As used in this Agreement, the term "Collateral" refers to all the
property described in this Section 1, as well as any portion or any interest in
it.

        2.      Representations and Warranties. Borrower covenants to FARO that,
except for the Security Interest granted to FARO by this Agreement:

                A.      Borrower is and will be the sole legal and equitable
owner of the Collateral;

                B.      the Collateral is and will be free and clear of all
liens, encumbrances, security interests, assessments, and adverse claims of
every kind and nature;

                C.      the grant of this Security Interest does not and will
not violate the terms of any agreement applicable to Borrower; and

                D.      Borrower has not, and will not, sell, assign, convey,
pledge, transfer, hypothecate, or in any other way dispose of or encumber the
Collateral, other than as provided in this Agreement.

        3.      Delivery of Collateral. Upon execution of this Agreement,
Borrower shall deliver the Shares to FARO. Borrower shall immediately provide
notice to the transfer agent of FARO of the Security Interest and shall cause
such Security Interest to be noted in the transfer records of such transfer
agent. Borrower shall deliver to FARO immediately upon receipt any Collateral
which is subsequently acquired by Borrower, or which is delivered to Borrower,
in exchange or substitution for any or all of the Collateral.

        4.      Maintenance of Security Interest. Borrower shall, upon request,
take any action reasonably deemed advisable by FARO to preserve the Collateral
or to establish, determine priority of, perfect, continue perfection of,
terminate or enforce FARO's Security Interest or its rights under this
Agreement.

        5.      Rights of FARO. FARO may at any time, upon or after the
occurrence of a default under the Note that is not cured within any applicable
grace or cure period, or after maturity of any of the Liabilities and without
notice or demand of any kind (a) transfer any of the Collateral into its name or
that of its nominee, (b) notify obligors on or issuers of any Collateral to make
payment or delivery to FARO of any amounts, securities, or rights due or
distributable thereon or notices given in connection therewith, (c) in
Borrower's name or otherwise, enforce collection of any Collateral by suit or
otherwise, or surrender, release or exchange all or part of it, or compromise,
extend or renew for any period any obligation evidenced by the Collateral, (d)
receive proceeds of the Collateral and exercise all rights as a holder of the
Collateral, (e) hold any increase or profits (including money) received from the
Collateral and exercise all rights as a holder of the Collateral, (f) hold any
increase or profits (including money) received from the Collateral as additional
security for the Liabilities, and (g) sign or endorse Borrower's name on the
Collateral.

        6.      Default. A default under the Note or Borrower's failure to
perform its obligations under this Agreement shall constitute a default under
this Agreement.

                                       B-2

<PAGE>

                                                                  EXHIBIT 10.5-B

        7.      Irrevocable Proxy on Default. In addition to FARO's other
rights, Borrower irrevocably appoints FARO as proxy, with full power of
substitution and revocation (upon the occurrence of a default under the Note or
hereunder that is not cured within any applicable grace or cure period) to
exercise Borrower's rights to attend meetings, vote, consent to, and take any
action respecting the Collateral as fully as Borrower might do. This proxy shall
become effective upon the occurrence of a default that is not cured within any
applicable grace or cure periods and shall remain effective for so long as any
of the Liabilities are unpaid.

        8.      Termination. This Agreement and the Security Interest of FARO
under it will terminate when all the Liabilities are paid in full. Upon
termination of this Agreement, FARO shall reassign and deliver to Borrower the
Collateral that is then held by FARO under this Agreement and has not been sold
or otherwise applied pursuant to the terms of this Agreement; provided, however,
in the event that another creditor of Borrower has been granted a pledge of the
Collateral subordinate to FARO, and FARO has actual notice of such pledge,
Borrower authorizes FARO to deliver the Collateral to such other creditor.

        9.      Legal Matters. The validity, construction, enforcement, and
interpretation of this Agreement shall be governed by the laws of the State of
Florida and the United States of America, without regard to principles of
conflict of laws. Each party to this Agreement (a) consents to the personal
jurisdiction of the state and federal courts having jurisdiction in Seminole
County, Florida, (b) stipulates that the proper, exclusive, and convenient venue
for any legal proceeding arising out of this Agreement is Seminole County,
Florida, for state court proceedings, and the Middle District of Florida,
Orlando Division, for federal district court proceedings, and (c) waives any
defense, whether asserted by a motion or pleading, that Seminole County,
Florida, or the Middle District of Florida, Orlando Division, is an improper or
inconvenient venue. In any mediation, arbitration, or legal proceeding arising
out of this Agreement, the losing party shall reimburse the prevailing party, on
demand, for all costs incurred by the prevailing party in enforcing, defending,
or prosecuting any claim arising out of this Agreement, including all fees,
costs, and expenses of experts, attorneys, witnesses, collection agents, and
supersedeas bonds, whether incurred before or after demand or commencement of
legal proceedings, and whether incurred pursuant to trial, appellate, mediation,
arbitration, bankruptcy, administrative, or judgment-execution proceedings.

        10.     Entire Understanding; Waiver. This Agreement records the final,
complete, and exclusive understanding among the parties regarding the subjects
addressed herein and supersede any prior or contemporaneous agreement,
understanding, or representation, oral or written by any of them on such
subjects. The provisions hereof may not be changed, modified, waived, or altered
except by an agreement in writing signed by the party entitled to the benefit of
the provision to be waived hereto. A waiver by any party of any of the terms or
conditions of this Agreement, or of any breach thereof, shall not be deemed a
waiver of such term or condition for the future, or of any other term or
condition hereof, or of any subsequent breach thereof.

        11.     Severability. Whenever possible, each provision of this
Agreement should be construed and interpreted so that it is valid and
enforceable under applicable law. If a provision of this Agreement is held to be
invalid or unenforceable under applicable law, however, that provision will be
deemed separable from the remaining provisions of this Agreement and will not

                                       B-3

<PAGE>

                                                                  EXHIBIT 10.5-B

affect the validity or interpretation of the other provisions of this Agreement
or the application of that provision to other circumstances in which it is valid
and enforceable.

        12.     Notices. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing, and may be by means of facsimile transmission,
delivered to the other party at the following address:

                    If to FARO:

                    FARO Technologies, Inc.
                    125 Technology Park
                    Lake Mary, Florida  32746
                    Telecopy: (407) 333-4181

                    Attention:  Gregory A. Fraser

                    With a copy to:

                    Foley & Lardner
                    100 North Tampa St., Suite 2700
                    Tampa, Florida 33602
                    Telecopy: (813) 221-4210

                    Attention:  Martin A. Traber

                    If to Borrower:

                    Siegfried Kurt Buss
                    Erbprinzenstr. 31
                    Karlsruhe, Deutschland  76133
                    Telecopy: 011-49-711-2222-444

                                       B-4

<PAGE>

                                                                  EXHIBIT 10.5-B

                    With a copy to:

                    Hasche Eschenlohr Peltzer Riesenkampff Fischotter
                    Neidenau 68
                    60325 Frankfurt/Main
                    Germany
                    Telecopy: 011-49-69-71-701-230

                    Attention:  Thomas Link

or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid; (ii) if
electronically transmitted, the next business day after transmission (and the
sender shall bear the burden of proof of delivery); or (iii) if sent by any
other means, upon delivery.

        13.     Effectiveness. This Agreement will become effective with respect
to the original parties to it, as of its stated execution date, when each of
those parties has executed and delivered to the others a counterpart of this
Agreement.

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

        15.     Miscellaneous. Time is of the essence of this Agreement. A
delay, omission, or course of dealing on the part of FARO in exercising any
right, power, or remedy will not operate as a waiver of it. A single or partial
exercise by FARO of any right, power, or remedy does not preclude any further
exercise or non-exercise of it or the exercise or non-exercise of any other
right, power or remedy. The exercise or non-exercise by FARO of any right,
power, or remedy does not constitute a waiver of a default under this Agreement.

        16.     Cancellation of Loan. Notwithstanding any provision contained
herein, or in any other document or agreement between FARO and Borrower,
Borrower shall have the option, in his sole discretion, at any time, to cancel
the Note pursuant to and in compliance with the provisions of Section 8 thereof.

                                       B-5

<PAGE>

                                                                  EXHIBIT 10.5-B

        IN WITNESS WHEREOF, the Borrower has executed this Agreement as of the
date first written above.

WITNESSES:

Signature:                                By:
          ---------------------------        -----------------------------------
                                                   Siegfried Kurt Buss

Print Name:                               Print Name:
           --------------------------                ---------------------------

Signature:
          ---------------------------

Print Name:
           --------------------------

                     BORROWER'S APPOINTMENT OF FARO AS AGENT

        In consideration of the covenants contained above, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by both Borrower and FARO, Borrower hereby appoints FARO as his
agent and attorney-in-fact (the "Agent") to sell or otherwise dispose of (i) any
portion or all of the Collateral (as referred to and defined in Section 1 above)
including, but not limited to, the Registered Shares and Non-registered Shares
that are components thereof; and (ii) any additional Registered Shares and/or
Non-registered Shares that Borrower delivers to FARO pursuant to the terms and
conditions of the Loan Documents. Borrower covenants and agrees to make all such
reasonable arrangements, do and perform all such reasonable acts and things,
execute and deliver all such certificates, documents and other instruments, and
to take such further reasonable actions as FARO may deem necessary or advisable
to effect the sale of Registered Shares pursuant to the S-1 Registration
Statement, or Non-registered Shares in compliance with the requirements of Rule
144, as the case may be, as Borrower's Agent and on Borrower's behalf. Borrower
grants FARO full and unfettered authorization to dispose of the Collateral, and
any portion thereof, in accordance with the terms and conditions of the Note, as
well as any other applicable provision of the Loan Documents. Further, Borrower
agrees to indemnify and hold FARO harmless from liability for any and all losses
or damages asserted or suffered by any party as a result of FARO's performance
as Borrower's Agent. FARO's appointment hereunder is irrevocable and shall
remain in full force and effect for so long as Borrower has not satisfied all of
his obligations pursuant to the Loan Documents. FARO hereby accepts its
appointment as Borrower's Agent under the terms and conditions hereof. The
appointment and authorization effected hereby, and the indemnification provided
for herein, shall (i) inure to the benefit of FARO, its successors and assigns;
and (ii) be binding upon Borrower, his heirs and assigns.

                                          FARO Technologies, Inc.

                                          By:
-------------------------------------        -----------------------------------
Siegfried Kurt Buss                       Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

                                       B-6

<PAGE>

                                                                  EXHIBIT 10.5-B

                                   SCHEDULE A

                                   THE SHARES

88,741 shares of the issued and outstanding common stock of FARO Technologies,
Inc., a Florida corporation, which is arrived at as a result of dividing the
original principal sum of the Note (stated in US dollars) by US $6.375 (the
"Shares").

                                       B-7

<PAGE>

                                                                  EXHIBIT 10.5-C

                                    AFFIDAVIT
                                       AND
                               INDEMNITY AGREEMENT

Karlsruhe, Germany                                                  July 5, 2000

        I, the undersigned, Siegfried Kurt Buss, an individual resident of
Germany (the "Affiant") whose current mailing address is Erbprinzenstr. 31,
Karlsruhe, Deutschland 76133, hereby represent and warrant as follows:

        That Affiant is the sole record owner and entitled to the possession of
the Certificate(s) described below representing an aggregate of one hundred
eighty-one thousand nine hundred nineteen (181,919) shares of the issued and
outstanding common stock of FARO Technologies, Inc., a Florida corporation (the
"Company"), such Certificate(s) being referred to hereafter as the "Original
Certificate(s)".

 Certificate     Date of                 Registered in                  Number
    Number      Certificate               the Name of                 of Shares
------------    -----------              -------------                ----------
____________    ___________          Siegfried Kurt Buss              __________
____________    ___________          Siegfried Kurt Buss              __________

        Affiant hereby certifies that, apart from the security interest granted
to the Company pursuant to that certain Pledge Agreement dated and made
effective as of the date of this Agreement by Affiant in favor of Company, no
other person has any right, title or interest in the Original Certificate(s) or
the securities represented thereby. Affiant will not hereafter sell, assign,
transfer, hypothecate, pledge or otherwise dispose of, either in whole or in
part, such Original Certificate(s) or the securities represented thereby, nor
give any person any power of attorney, order or other authority of any kind or
nature whatsoever to transfer such Original Certificate(s) or the securities
represented thereby, or any part or portion thereof or interest therein, without
first obtaining the written consent of the Company. Further, Affiant says that
this affidavit and agreement are made in order to introduce the Company to
extend credit and other financial accommodations to Affiant.

        IN CONSIDERATION THEREFOR, Affiant hereby agrees for Affiant and
Affiant's heirs, legal representatives and assigns that in case any of Affiant's
representations herein are materially false or misleading, or in the event that
Affiant breaches or violates any of his undertakings herein, Affiant agrees for
Affiant and Affiant's heirs, legal representatives and assigns to indemnify and
save harmless the Company, the Company's successors or assigns and the Company's
directors, officers and employees from and against any and all liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every nature
and character which they sustain or incur by reason of their reliance on any
such false or misleading representation, or due to any breach or violation by
Affiant.

                                       C-1

<PAGE>

                                                                  EXHIBIT 10.5-C

        All obligations of the Affiant hereunder shall be binding upon the
Affiant, his heirs, legal representatives, successors or assigns.

        IN WITNESS WHEREOF, the Affiant has executed this document as of the
date first written above.

WITNESSES:

Signature:                                By:
          ---------------------------        -----------------------------------
                                                   Siegfried Kurt Buss

Print Name:                               Print Name:
           --------------------------                ---------------------------

Signature:
          ---------------------------

Print Name:
           --------------------------

                                       C-2

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