FARO TECHNOLOGIES INC
AGREEMENT REGARDING ADDITIONAL ADVANCES
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>4
<FILENAME>dex1020.txt
<DESCRIPTION>AGREEMENT REGARDING ADDITIONAL ADVANCES
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.20

                    AGREEMENT REGARDING ADDITIONAL ADVANCES

     THIS AGREEMENT REGARDING ADDITIONAL ADVANCES (this "Agreement") is made and
effective as of October 31, 2001, by and between SPATIALMETRIX CORPORATION, a
Delaware corporation (the "Borrower") and FARO TECHNOLOGIES, INC., a Florida
corporation (the "Lender")

                                R E C I T A L S

     WHEREAS, pursuant to the terms and conditions of a certain Loan Agreement
(the "Credit Agreement") dated January 28, 1998 and related agreements,
instruments and documents, all as amended from time to time (collectively, the
"Credit Documents"), PNC Bank, National Association (the "Senior Lender") has
made loans, advances and extensions of credit ("Line of Credit") to Borrower;
and

     WHEREAS, on April 13, 2001, the Borrower and the Lender entered into that
certain Agreement (the "Initial Agreement") pursuant to which the Lender entered
into a Participation Agreement with the Senior Lender for the provision of
additional credit under the Line of Credit in the amount of $1,500,000,
increasing the maximum principal amount available to $3,800,000; and

     WHEREAS, contemporaneously with execution of the Initial Agreement, the
Borrower and the Lender entered into letters of intent proposing (a) an
additional extension of credit (the "On-Going Loan Letter of Intent") and (b)
the acquisition by the Lender of all of the stock of the Borrower (the
"Acquisition Letter of Intent"); and

     WHEREAS, on September 14, 2001, the Lender and the Borrower entered into
that certain Agreement and Plan of Merger (the "Merger Agreement") providing, at
the Lender's election, for the acquisition of the Borrower by the Lender and its
affiliates; and

     WHEREAS, contemporaneously herewith, the Lender is entering into an Amended
Participation Agreement (the "Amended Participation Agreement") with the Senior
Lender pursuant to which the Lender is making available to the Borrower
additional credit in the maximum amount of $1,500,000 through an additional
participation with the Senior Lender; and

     WHEREAS, the Borrower and the Lender desire in this Agreement to set forth
the terms and conditions under which the Lender shall make additional credit
available to the Borrower through its participation with the Senior Lender; and

     WHEREAS, the Borrower has determined that its entry into this Agreement is
in the best interests of the Borrower, and that the additional financing made
available to the Borrower by the Lender's entry into the Participation Agreement
is fair and adequate consideration for this Agreement.
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     NOW, THEREFORE, for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged) and intending to be legally bound
hereby, the Borrower and Lender hereby agree as follows:

                 ARTICLE 1  :  REPRESENTATIONS AND WARRANTIES

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

     1.1. Confirmation. Except as set forth on Schedule 1.1 attached hereto, the
representations and warranties made in the Initial Agreement, the Merger
Agreement and the Credit Agreement are true and correct as of the date hereof.

     1.2.  No Defaults.  Except as set forth on Schedule 1.2 attached hereto, no
Event of Default under the Initial Agreement, the Merger Agreement or the Credit
Agreement and no event which with the passage of time or the giving of notice or
both could become an Event of Default under the Initial Agreement, the Merger
Agreement or the Credit Agreement exists on the date hereof.

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

     1.4. No Violation. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by Borrower
pursuant hereto, nor the consummation by Borrower of the transactions
contemplated hereby and thereby (a) to the knowledge of Borrower will violate
any applicable law, statute, regulation or order of any Official Body, (b)
require any authorization, consent, approval, exemption or other action by or
notice to any Official Body, or (c) subject to obtaining the consents referred
to in Schedule 1.4, will violate or conflict with, or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or will result in the termination of, or accelerate the
performance required by, or result in the creation of any lien upon any of the
assets of Borrower under, any term or provision of the Certificate of
Incorporation or Bylaws of Borrower or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which Borrower is a party or by which Borrower or any of its assets or
properties may be bound or affected.

                                       2
<PAGE>

     1.5. No Defenses, Counterclaims or Offsets. Borrower agrees that it has no
defenses or set-offs against the Lender, its officers, directors, employees,
agents or attorneys with respect to the Initial Agreement and the Merger
Agreement, all of which are in full force and effect and shall remain in full
force and effect unless and until modified or amended in writing in accordance
with their terms. Borrower hereby ratifies and confirms its obligations under
the Initial Agreement and the Merger Agreement and agrees that the execution and
the delivery of this Agreement does not in any way diminish or invalidate any of
its obligations thereunder.

                        ARTICLE 2:  CREDIT AVAILABILITY

     2.1.  Additional Advances.

     (a) Lender agrees to make available to the Senior Lender under a
participation agreement with the Senior Lender, additional credit (the
"Additional Advances") in a maximum principal amount equal to One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00). The Lender agrees that the
first advance of $750,000 (the "First Advance") shall be made available promptly
after execution of this Agreement, the Amended Participation Agreement and
amendments to the Credit Documents. Additional Advances shall be made upon the
attainment of product development benchmarks (the "Funding Hurdles") described
in Schedule 2.1 satisfactory to the Lender. Additional Advances shall be made
following written request by the Borrower accompanied by substantiation as to
the attainment of the applicable Funding Hurdles, and shall be in increments of
not less than $100,000.

     (b) Immediately upon receipt of the First Advance of $750,000.00, the
Borrower shall repurchase from the Lender the laser tracker previously sold by
the Borrower to the Lender for the sum of $250,000.00 in immediately payable
funds.

     (c)  No Additional Advances shall be made after December 28, 2001.


     2.2. Use of Proceeds. The Borrower shall not use the Additional Advances
for any of the following purposes without the prior written consent of the
Lender:

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

          (b) Payments to First Union Capital Partners or the Senior Lender; or

          (c) Distributions to stockholders of the Borrower, whether as
dividends or in redemption of stock of the Borrower.

                        ARTICLE 3: CONDITIONS PRECEDENT

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

                                       3
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          (a) Credit Agreement. The Borrower shall enter into such amendments to
the Credit Agreement and to the loan documents ancillary thereto as the are
required by the Senior Lender and approved by the Borrower.

          (b) No Breach or Default. The Borrower shall not have breached or
defaulted under any provision of the Merger Agreement or the Credit Documents.

          (c) Representations and Warranties. The representations and warranties
contained in this Agreement and the Merger Agreement shall be true, correct and
complete.

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

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

     3.2. Conditions Precedent to Additional Advances. Each of the following are
conditions precedent to the making of Additional Advances by the Lender:

          (a) No Default. There shall not have occurred any default or Event of
Default under the Credit Documents, the Merger Agreement, the Initial Agreement
or this Agreement.

          (b) Satisfaction of Lender. The Borrower shall have provided to the
Lender such substantiation as the Lender may request in order to demonstrate
attainment of the Funding Hurdle.

          (c) Representations and Warranties True. The representations and
warranties made in the Credit Agreement, the Merger Agreement, the Initial
Agreement and this Agreement shall be true and correct.

                            ARTICLE 4:  DEFINITIONS

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

                                       4
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     (a) "Additional Advances" shall have the meaning set forth in Section
2.1(a).

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

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

     (d)  "Amended Participation Agreement" is defined in the Recitals hereto.

     (e)  "Borrower" means SPATIALMETRIX CORPORATION, a Delaware corporation.

     (f)  "Credit Agreement" is defined in the Recitals.

     (g) "Credit Documents" mean the Credit Agreement, as amended, together with
every instrument, agreement or document executed by the Borrower in connection
therewith.

     (h)  "Funding Hurdles" shall have the meaning set forth in Section 2.1(a).

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

     (j) "Merger Agreement" means that certain Agreement and Plan of Merger
dated as of September 14, 2001 by and among Borrower, Lender and FARO
Acquisition LLC, a wholly-owned subsidiary of Lender.

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

     (l)  "Participation Agreement" is defined in the Recitals hereto.

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

     (n)  "Senior Lender" means PNC Bank, National Association

                    ARTICLE 5:  MISCELLANEOUS PROVISIONS

                                       5
<PAGE>

     5.1. Letters of Intent. The parties agree that the terms and provisions of
the Acquisition Letter of Intent and the On-Going Loan Letter of Intent, to the
extent enforceable, are merged into the Merger Agreement and this Agreement.

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

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


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

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

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

     5.7. Waiver of Notice; Waiver of Bond. Borrower waives the posting of any
bond otherwise required of Lender in connection with any judicial process or
proceeding to enforce any judgment or other court order entered in favor of
Lender, or to enforce by specific

                                       6
<PAGE>

performance, temporary restraining order or preliminary or permanent injunction
this Agreement.

     5.8. Forum Selection and Consent to Jurisdiction. Any litigation in any way
related to this Agreement, or any course of conduct, course of dealing,
statements (whether verbal or written), actions or inactions of Lender or
Borrower will be brought and maintained exclusively in the courts of the
Commonwealth of Pennsylvania of the United States District Court for the Eastern
District of Pennsylvania. Borrower and Lender hereby expressly and irrevocably
submit to the jurisdiction of the courts of the Commonwealth of Pennsylvania or
the United States District Court for the Eastern District of Pennsylvania for
the purpose of any such litigation as set forth above and irrevocably agree to
be bound by any final and non-appealable judgment rendered thereby in connection
with such litigation. Borrower and Lender further irrevocably consents to the
service of process by registered or certified mail, postage prepaid, or by
personal service within or outside the Commonwealth of Pennsylvania. Borrower
and Lender hereby expressly and irrevocably waive (to the fullest extent
permitted by law) any objection which they may have or hereafter may have to the
laying of venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in an inconvenient
forum.

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

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

                                       7
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as an
instrument under seal (whether or not any such seals are physically attached
hereto), through their duly authorized officers, as of the date first written
above.

ATTEST:                                SPATIALMETRIX CORPORATION
                                       (Borrower)

By:                                    By:
   ------------------------------         -----------------------------------
Name:                                  Name:  Andrew Thomson
Title:                                 Title: President

[CORPORATE SEAL]                       Address:  222 Gale Lane
                                                 Kennett Square, PA 19348
                                                 Facsimile No: (610) 444-2323
                                                 Attn:  Andrew Thomson


                                       FARO TECHNOLOGIES, INC.
                                       (Lender)

                                       By:______________________________
                                       Name:  Simon Raab
                                       Title:  President

                                       Address:  125 Technology Park Drive
                                                 Lake Mary, Florida  32746
                                                 Facsimile No:  (407) 333-4181
                                                 Attn:  Simon Raab
<PAGE>

                                  Schedule 1.1

                 Confirmation of Representations and Warranties


                                      NONE




                                       2
<PAGE>

                                  Schedule 1.2

                                  No Defaults


     The Borrower is in default under the Credit Agreement.  All of the defaults
of the Borrower under the Credit Agreement are set forth in Section 5 of the
Sixth Amendment to Loan Documents, executed by the Borrower contemporaneously
herewith.
<PAGE>

                                  Schedule 2.2

                                Funding Hurdles


 1.  Receive Alpha Structural Components*
 2.  Order Alpha/Beta Cover Castings*
 3.  Complete Alpha Mechanical Assembly*
 4.  Complete Alpha Testing*
 5.  Order Structural Castings*
 6.  Receive Beta Structural Castings*
 7.  Receive Alpha/Beta Cast Covers*
 8.  Complete Assembly & In-House Testing of Beta Machines
 9.  Complete Beta Test in the Field
10.  Release Production Circuit Boards*
11.  Release Miscellaneous Mechanical Components*
12.  Release Optical Parts*
13.  Release Packaging*
14.  Complete Production Procedures
15.  Complete Production Tooling and Fixtures
16.  Complete Test Procedures
17.  Complete Test Fixtures*
18.  Receive Circuit Boards
19.  Receive Mechanical Components
20.  Receive Optical Parts
21.  Receive Packaging
22.  Receive Firmware
23.  Release Software
24.  Launch Keystone Production
25.  Complete Delivery Ready Status

*Items marked with an asterisk are represented by the Borrower by its letter to
Simon Raab dated October 15, 2001 to be completed.

  For greater certainty, Complete Delivery Ready Status means successful
  completion of all the items below:

      .   Stock of 20 units including all parts with supply lead time greater
          than thirty (30) days,

      .   Completed assembly of 3 units the foregoing inventory of parts, that
          meets delivery specifications,

      .   Tested and confirmed 50 man-hours or less of assembly labor,
<PAGE>

      .   Bill  of Materials costed with supporting Quantity of 100 quotes and
          purchased stock invoices, and

      .   Targeted Cost range either ADM or IFM option confirmed to be in the
          range of $25,000 to $28,000 or lower, including manufacturing labor.
          Current targets for the components are:

          .   Tracker Head and Master Control Unit                 $17,000

          .   ADM Components                                       $ 5,000

          .   IFN Components                                       $ 7,000

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