Document:

Exhibit 10.17

      2. FIRST AMENDMENT TO CREDIT AGREEMENT

      THIS FIRST AMENDMENT TO CREDIT AGREEMENT (hereinafter referred to as the
"Amendment") is made as of the 31st day of October, 2003, by and between

      MIKRON INFRARED, INC., a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey, having its principal
office located at 16 Thornton Road, Oakland, New Jersey 07436 (hereinafter
referred to as the "Borrower"),

      AND

      FLEET NATIONAL BANK, a national banking association duly organized and
validly existing under the laws of the United States of America, having an
office for business located at 208 Harristown Road, Glen Rock, New Jersey 07452
(hereinafter referred to as the "Bank").

                              W I T N E S S E T H:

      WHEREAS, the parties have agreed to amend that certain Credit Agreement,
dated as of November 21, 2002 (the "Credit Agreement" and terms defined therein
and not otherwise defined herein being used herein as therein defined), as
hereinafter set forth.

      NOW, THEREFORE, the Borrower and the Bank, hereby agree as follows:

      SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
effective as of the Effective Date (as defined in Section 2 hereof), hereby
amended as follows:

      1.1   Page 3, Section 1.1 of the Credit Agreement is hereby revised to
            reflect the deletion and replacement in its entirety of the
            definition of "Advance Limit" with the following definition:

            ""Advance Limit" shall mean, at any date of determination thereof,
            an amount equal to the lesser of (i) Four Million and 00/100
            ($4,000,000.00) Dollars or (ii) the sum of (1) eighty (80%) percent
            of the face amount of the Borrower's Eligible Accounts Receivable,
            plus (2) fifty (50%) percent of the Borrower's Eligible Inventory,
            plus (3) twenty-five (25%) percent of the value of the Borrower's
            Eligible PP&E, plus (4) one hundred (100%) percent of the value of
            the MMA Account."

      1.2   Page 3, Section 1.1 of the Credit Agreement is hereby revised to
            reflect the addition of the following definition:

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            ""Assignment" shall mean that certain Assignment and Pledge
            Agreement, dated as of October 31, 2003, executed by the Borrower in
            favor of the Bank; whereby the Borrower has assigned, pledged,
            hypothecated and granted in favor of the Bank a first security lien
            interest in and to the MMA Account as collateral security for the
            Facility."

      1.3   Page 4, Section 1.1 of the Credit Agreement is hereby revised to
            reflect the deletion and replacement in its entirety of the last
            sentence of the definition of "Collateral" with the following
            definition:

            "In addition, the term "Collateral" shall also be deemed to include
            the Guaranty Agreement and the Assignment."

      1.4   Page 16, Section 1.1 of the Credit Agreement is hereby revised to
            reflect the addition of the following definition::

            ""MMA Account" shall mean that certain Money Market Account, No.
            9421082594."

      1.5   Page 36, Section 4.1(iii) of the Credit is hereby deleted in its
            entirety.

      1.6   Page 41, Section 4.25 of the Credit Agreement is hereby deleted in
            its entirety and replaced with the following:

            "Section 4.25 Capitalization; Ownership of the Borrower. On and as
            of the Closing Date, the authorized Capital Stock of the Borrower
            will consist of Fifteen Million (15,000,000) authorized shares of
            common stock, one-third cent par value. Five Million Two Hundred
            Fifty Nine Thousand Six Hundred Twenty Eight (5,259,628) shares of
            common stock are duly issued, are outstanding and are fully paid and
            non-assessable."

      1.7   Page 53, Section 6.18 of the Credit Agreement is hereby deleted in
            its entirety and amended to reflect the following:

                                                       "Section 6.18 Maximum
                                                       Leverage Ratio. The
                                                       Borrower shall not
                                                       permit, cause nor suffer
                                                       to permit, at any time
                                                       during the term of the
                                                       Facility, its Maximum
                                                       Leverage Ratio, to be
                                                       greater than 2.0 to 1.0.
                                                       The ratio shall be
                                                       determined as of the last
                                                       day of each Fiscal
                                                       Quarter for the four
                                                       quarter period ending on
                                                       such day."

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<PAGE>

      SECTION 2. Effectiveness of this Amendment. This Amendment shall become
effective as of the date first above written (the "Effective Date").

      SECTION 3. Representations and Warranties. The Borrower hereby represents
and warrants as follows:

      (a) The execution, delivery and performance by the Borrower of this
Amendment is within its corporate powers and has been duly authorized by all
necessary action and does not and will not (i) require any consent or approval
of the shareholders of the Borrower, (ii) conflict with any Borrower's
incorporation documents, (iii) result in a breach of or constitute a default
under any obligation to which the Borrower is a party of by which it or its
properties may be bound or affected, or (iv) result in, or require, the creation
or imposition of any lien of any nature upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower.

      (b) All Permits, consents or waivers from or by, notices to or filings
with or other actions by any court or Governmental Authority, required in
connection with the execution, delivery or performance by the Borrower of this
Amendment, if any, have been obtained, given, filed or taken and are in full
force and effect.

      (c) This Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its terms except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally or by
general equity principles.

      (d) The representations and warranties contained in Article IV of the
Credit Agreement are true and correct in all respects on and as of the date
hereof, as though made on and as of the date hereof.

      (e) No event has occurred, or would result from the execution, delivery or
performance of this Amendment, the Credit Agreement or the Loan Documents, as
amended hereby, which constitutes a Default or an Event of Default.

      SECTION 4. Reference to and Effect of the Loan Documents.

      4.1 Upon the effectiveness of this Amendment, on and after the date
hereon, each reference in the Credit Agreement to this Agreement", "hereunder",
"hereof", or words of like import, and each reference in the other Loan
Documents to the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended hereby.

      4.2 Except as specifically amended above, all of the terms of the Credit
Agreement and all other Loan Documents shall remain unchanged and in full force
and effect.

      4.3 The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Bank under

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<PAGE>

the Credit Agreement, the Note or any of the Loan Documents, nor constitute a
waiver of any provision of the Credit Agreement or any of the Loan Documents.

      SECTION 5. Execution in Counterparts. This Amendment may be executed and
delivered in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original and all of which taken together shall constitute one and the
same original agreement.

      SECTION 6. GOVERNING LAW, SEVERABILITY. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREUNDER. WHEREVER POSSIBLE, EACH
PROVISION OF THIS AMENDMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AMENDMENT
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, 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
AMENDMENT.

      SECTION 7. JURY TRIAL. THE BORROWER AND THE BANK (BY ACCEPTANCE OF THIS
AMENDMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITHH THIS AMENDMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE BANK RELATING TO THE ADMINISTRATION OF THE FACILITY
OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREE THAT NEITHER PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OIR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT
THIS AMENDMENT.

                        [SPACE INTENTIONALLY LEFT BLANK]

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<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered, all as of the day and year first above written.

                                        MIKRON INFRARED, INC.

                                        By: ____________________________________
                                                Gerald D. Posner, President

                                        FLEET NATIONAL BANK

                                        By: ____________________________________
                                            Michael G. Vondras, Vice President

                                       5Exhibit 10.18

                         ASSIGNMENT AND PLEDGE AGREEMENT

      THIS ASSIGNMENT AND PLEDGE AGREEMENT (hereinafter referred to as the
"Agreement"), is dated as of the 31st day of October, 2003 by and between MIKRON
INFRARED, INC. (hereinafter referred to as the "Pledgor") in favor of FLEET
NATIONAL BANK (hereinafter referred to as the "Pledgee").

                                   WITNESSETH:

      WHEREAS, the Pledgor is indebted to the Pledgee in the aggregate principal
amount of up to Four Million and 00/100 ($4,000,000.00) Dollars (hereinafter
referred to as the "Facility"), pursuant to a certain Credit Agreement, dated as
of November 21, 2002, executed by and between the Pledgor and the Pledgee; and

      WHEREAS, the Pledgor and the Pledgee have agreed to amend certain terms
and conditions of the Credit Agreement, pursuant to that certain First Amendment
to Credit Agreement, dated as of October 31, 2003; provided, inter alia, the
Pledgor execute this Agreement (hereinafter the Credit Agreement, as same has
been and may be amended from time to time shall be collectively referred to as
the "Credit Agreement"); and

      WHEREAS, the Pledgor has agreed to execute this Agreement.

      NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the agreements
described hereinabove) heretofore, now or hereafter made to or for the benefit
of the Pledgor by the Pledgee in connection with the transactions contemplated
by the Loan Documents, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

      1. Defined Terms. As used in this Agreement, the following words and terms
shall have the following meanings, unless the context otherwise requires and all
such other terms capitalized herein and not defined herein shall have the
meanings assigned and ascribed to such terms as set forth in the Credit
Agreement:

      (i)   "Agreement" shall have the meaning assigned and ascribed to such
            term as set forth in the Preamble of this Agreement.

      (ii)  "Collateral" shall mean, collectively, the MMA Account and the
            Derived Rights.

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<PAGE>

      (iii) "Derived Rights" shall mean any and all right, title, claim, benefit
            and interest of the Pledgor in the MMA Account, both now and in the
            future, including, without limitation, all monies, drafts and other
            legal tender constituting the MMA Account, any and all Proceeds of
            any of the foregoing and all accretions thereof.

      (iv)  "MMA Account" shall mean that certain money market account, no.
            9421082594, opened and owned by the Pledgor as collateral security
            for the Facility and any and all Proceeds of any of the foregoing
            and all accretions thereof.

      (v)   "Pledgee" shall have the meaning assigned and ascribed to such term
            as set forth in the first Recital Preamble of this Agreement.

      (vi)  "Pledgor" shall have the meaning assigned and ascribed to such term
            as set forth in the Preamble of this Agreement.

      2. Agreement to Deliver. The Pledgor hereby covenants and agrees with the
Pledgee to deposit with or transfer to or to cause to be deposited with or to be
transferred to the Pledgee, or such nominee or nominees as the Pledgee may
direct in writing, the MMA Account.

      3. Grant of Security Interest. The Pledgor hereby covenants and agrees to
deposit with or transfer to or to cause to be deposited with or to be
transferred to the Pledgee, or such nominee or nominees as the Pledgee may
direct in writing, the Collateral, as follows:

      (i)   as and by way of a grant, assignment, mortgage, pledge,
            hypothecation, charge and security interest, the MMA Account; and

      (ii)  as and by way of an absolute assignment and security interest, all
            of the Derived Rights.

      4. Attachment of Security Interest. The pledge, hypothecation, charge,
assignment and security interest created by this Agreement shall attach at the
later of when this Agreement is executed and when the Pledgor has rights in the
Collateral and thereafter the assignment of the Derived Rights shall be an
absolute assignment and security interest. After the delivery of the MMA
Account, the pledge, grant, assignment and hypothecation of the MMA Account,
shall be a fixed and specific pledge and security interest.

      5. Use of Collateral. (i) So long as no Event of Default shall have
occurred, the Pledgor shall have the privilege under a revocable license to
receive, use and have the benefit of the Collateral, including, without
limitation, the right to receive all payments of interest paid by the Bank
thereon. Upon the occurrence of an Event of Default, such license, granted to
the Pledgor pursuant to the terms and conditions set forth herein, shall be
immediately revoked without further demand or notice from the Pledgee, and the
Pledgee shall thereupon be empowered to enter upon and take possession of the
Collateral as more fully set forth herein.

      (ii) Notwithstanding any provision of this Agreement to the contrary, it
is hereby acknowledged and agreed by the parties hereto and without in any way
affecting the security

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<PAGE>

interest granted herein, that the Pledgor, upon prior express written notice to
the Pledgee, shall be permitted to make any substitutions, withdrawals and/or
replacements of the Collateral throughout the term of the Facility, provided,
however, any such substitutions, withdrawals and/or replacements of the
Collateral may not cause an Event of Default. The Pledgor covenants and agrees
that in connection with such prior express written notice to the Pledgee of any
substitutions, withdrawals and/or replacements of the Collateral, such notice
shall describe the action to be taken with respect to the Collateral and include
a certification by a Responsible Officer of the Pledgor that such action shall
not cause a Default or Event of Default under the Loan Documents.

      6. Representations and Warranties of Pledgor. The Pledgor hereby
represents and warrants to the Pledgee as follows and acknowledges that the
Pledgee is relying on such representations and warranties in accepting the grant
of a security interest in the Collateral as security for the Obligations, which
representations and warranties shall survive the execution and delivery of this
Agreement and the delivery of the MMA Account:

      (i)   The Pledgor is a corporation duly validly existing and in good
            standing under the law of the State of New Jersey and has the
            corporate power and authority to own its property and to carry on
            its business as presently carried on or proposed to be carried on
            and is duly qualified and authorized to carry on business wherever
            the nature of its properties or activities require such
            qualification and authorization.

      (ii)  The Pledgor is the registered and beneficial owner of the MMA
            Account, and the MMA Account is free and clear of any charge, lien,
            pledge, hypothecation, restriction, security interest or encumbrance
            of any kind whatsoever. The Pledgor has the full right, power and
            authority to pledge, grant a security interest in and deliver the
            Collateral.

      (iii) No person has any agreement or option or any right or privilege
            capable of becoming an agreement or option to acquire any right or
            interest in any of the Collateral.

      (iv)  The Pledgor will be the legal and beneficial owner of the Derived
            Rights, and the Derived Rights shall remain free and clear of all
            liens, charges, pledges, encumbrances, claims, counterclaims,
            set-offs and contra-accounts whatsoever.

      (v)   The Pledgor has the exclusive right and power to enter into this
            Agreement and to pledge, hypothecate, assign, deliver, and grant a
            security interest in and to otherwise deal with the Collateral and
            all necessary consents, instruments, approvals and resolutions have
            been obtained or passed in order for the Pledgor to deliver the MMA
            Account and to assign the Derived Rights to the Pledgee for and on
            behalf of the Pledgee, for the Collateral to be transferred to the
            Pledgee and for the Pledgee to realize on the Collateral.

      (vi)  The Collateral and the right and power to pledge, hypothecate, sell,
            transfer, assign, deliver and otherwise deal with the same are not
            subject to any

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<PAGE>

            restrictions, conditions, provisos or limitations imposed under any
            law, regulation, rule or other similar statute of any other
            competent jurisdiction.

      (vii) Neither the execution and delivery of this Agreement, the
            consummation of the transactions herein contemplated nor the
            compliance with the terms, conditions and provisions hereof will
            conflict with or result in a breach of any of the terms, conditions
            or provisions of:

            (a)   any material agreement, instrument or arrangement to which the
                  Pledgor is now a party or by which the Pledgor is or may be
                  bound, or constitute a default thereunder;

            (b)   any judgment or order, writ, injunction or decree of any
                  court;

            (c)   any applicable law or governmental regulation;

            (d)   the certificate of incorporation or by-laws of the Pledgor; or

            (e)   any shareholders' agreement.

     (viii) No action of, or filing with, any governmental or public body or
            authority is required to authorize, or is otherwise required in
            connection with, the execution, delivery and performance of this
            Agreement by the Pledgor.

      (ix)  There are no actions, suits or proceedings pending or, threatened,
            nor, is there any pending investigation against or involving the
            Pledgor at law or in equity or before or by any federal, provincial,
            municipal or other governmental department, commission, board,
            bureau, agency or instrumentality, domestic or foreign, or before
            any arbitrator of any kind, which involve a reasonable possibility,
            so far as the Pledgor can foresee, of any material adverse change in
            the financial affairs of the Pledgor and the Pledgor is not in
            default with respect to any judgment, order, writ, injunction,
            decree, rule or regulation of any court, arbitrator or federal,
            provincial, state, municipal or other governmental department,
            commission, board, bureau, agency or instrumentality, domestic or
            foreign, which involves a reasonable possibility, so far as the
            Pledgor can foresee, of any material adverse change in the financial
            affairs of the Pledgor.

      (x)   The pledge, assignment, hypothecation and delivery of the Collateral
            pursuant to this Agreement creates a valid first perfected security
            interest in the Collateral.

      7. Covenants of Pledgor. The Pledgor hereby covenants and agrees with the
Pledgee that so long as this Agreement is in full force and effect:

      (i)   The Pledgor shall not permit nor continue to permit any encumbrance,
            lien, charge, mortgage, assignment or security interest in respect
            of the

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<PAGE>

            Collateral to exist or to be created in favor of any party except
            the Pledgee.

      (ii)  The Pledgor shall deliver to the Pledgee such endorsements,
            transfers, instruments, powers of attorney, consents, authorizations
            and other documents in blank as may be necessary to effect any
            disposition or dispositions of all or any part of the Collateral
            pursuant to the provisions of this Agreement.

      (iii) Except as permitted herein, the Pledgor shall not sell, convey or
            otherwise dispose of any of the Collateral or any interest therein.

      (iv)  The Pledgor shall, at its expense, defend the right, title and
            security interest in and to the Collateral granted to the Pledgee
            against the claims of any person, firm, corporation or other entity.

      (v)   The Pledgor shall pay to the Pledgee, on demand, all costs and
            expenses of the Pledgee, its agents and solicitors, incurred with
            respect to:

            (a)   the preparation, execution and filing of this Agreement;

            (b)   the exercising of all or any of the rights, remedies and
                  powers of the Pledgee under this Agreement; and

            (c)   any or all of the taking of, recovering or possessing of the
                  Collateral and any other proceedings taken for the purpose of
                  enforcing the remedies provided herein or otherwise taken in
                  relation to any part or all of the Collateral or taken by
                  reason of the non-payment of the indebtedness and obligations
                  arising under the Credit Agreement hereby secured;

            and all such costs and expenses shall bear interest after demand at
            the Default Rate at such time in respect of any of the Obligations
            and the payment of such costs and expenses together with such
            interest shall be secured by the Collateral.

      8. Enforcement. Upon the occurrence of a Default or Event of Default, the
Pledgee shall have the following rights, powers and remedies:

      (i)   the Pledgee may exercise the rights of the Pledgor under or
            otherwise deal with the Collateral or any part thereof in such
            manner, upon such terms and conditions and at such time or times as
            they may deem advisable, including, without limitation, the right
            and power:

                  (a)   to sell, transfer and realize all or any part of the
                        Collateral whether by public or private sale or
                        otherwise in such manner, at such place

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<PAGE>

                        and on such terms and conditions as to the Pledgee may
                        seem commercially reasonable, including, without
                        limitation, terms that provide time for payment or
                        credit; provided always that

                        (1)   it shall not be incumbent on the Pledgee to sell
                              or dispose of the Collateral but that it shall be
                              lawful for the Pledgee peaceably and quietly to
                              take, hold, use, occupy, possess and enjoy the
                              Collateral without molestation, eviction,
                              hindrance or interruption of the Pledgor or any
                              other person or persons whatsoever, provided, that
                              in any such case, the amount taken, held, used and
                              enjoyed shall be applied on account of the
                              indebtedness and liability of the Pledgor to the
                              Pledgee under the Loan Documents.

                        (2)   The Pledgee may convey, transfer and assign to a
                              purchaser or purchasers the title to all or any
                              part of the Collateral sold,

                        (3)   The Pledgee shall have the right to purchase all
                              or any part of the Collateral at any public or
                              private sale thereof, and

                        (4)   The Pledgor shall be entitled to be credited only
                              with the actual proceeds of such sale or other
                              disposition of the Collateral when received by the
                              Pledgee and the actual proceeds of such sale shall
                              mean all amounts received in cash by the Pledgee
                              upon the sale or other disposition of all or any
                              part of the Collateral;

            and the Pledgee may charge on their own behalf and pay to others
            reasonable amounts for expenses incurred and for services rendered,
            including, without limitation, legal fees and brokerage fees for or
            in connection with the selling, realizing or otherwise dealing with
            the Collateral;

      (ii)  all monies realized or received by the Pledgee in respect of the
            Collateral may be applied on account of such part of the
            indebtedness and liability of the Pledgor to the Pledgee as the
            Pledgee deem best or may be held unappropriated in collateral
            accounts or, in the sole discretion of the Pledgee, may be released
            to the Pledgor, all without prejudice to the claim of the Pledgee
            against the Pledgor;

      (iii) if, after the expenses of the Pledgee in connection with the
            preservation and realization of the Collateral as above-described
            shall have been satisfied and all Obligations of the Pledgor,
            including contingent obligations of the Pledgor to the Pledgee,
            shall have been satisfied and paid in full together with interest
            thereon, the balance of any money in the hands of the Pledgee
            arising out of the realization of the Collateral shall be paid to
            any person other than the Pledgor whom the Pledgee knows to be the
            owner of, or to have a security interest in, the Collateral, and in
            the absence of such knowledge, such balance shall be paid to the
            Pledgor;

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<PAGE>

      (iv)  to make payment to parties having prior assignments, charges or
            encumbrances on or any prior security interests in any of the
            Collateral;

      (v)   to enjoy and exercise all powers necessary or incidental to the
            performance of all functions provided for in this Agreement;

      (vi)  to exercise all of the rights and remedies of a secured party under
            the UCC, as amended from time to time;

      (vii) to dispose of all or any part of the Collateral in the condition in
            which such Collateral was on the date possession of such Collateral
            was taken or after any commercially reasonable preparation for
            disposition;

     (viii) notwithstanding subsection (a) of this section, if the Pledgee
            believe, on reasonable grounds, that all or any part of the
            Collateral will decline speedily in value, the Pledgee may sell or
            otherwise dispose of all or any part of the Collateral without
            giving any notice whatsoever;

      (ix)  the Pledgee, at its sole option may elect to retain all or any part
            of the Collateral; and

      (x)   exercise any and all rights of setoff granted to it either by reason
            of law or as provided for in the Credit Agreement and the Loan
            Documents.

      9. General Provisions. The Pledgor hereby agrees with the Pledgee that:

            a.    the Pledgee shall not be liable or accountable to the Pledgor
                  or to any other party for any failure to seize, collect,
                  realize, sell or obtain payment of all or any part of the
                  Collateral and the Pledgee shall not be bound to institute
                  proceedings for the purpose of seizing, collecting, realizing,
                  obtaining possession or payment of the same for the purpose of
                  preserving any rights of the Pledgee, the Pledgor or any other
                  party in respect of the same;

            (ii)  the Pledgee may grant extensions of time and other
                  indulgences, take and give up security, accept compositions,
                  grant releases and discharges, release all or any part of the
                  Collateral to third parties and otherwise deal with the
                  Pledgor, debtors of the Pledgor, sureties and others and with
                  the Collateral and other security as the Pledgee may see fit
                  without prejudice to the Guarantee or the right of the Pledgee
                  to hold and realize the Collateral; and

            (iii) where the Collateral has been disposed of by the Pledgee as
                  provided herein, the difference, if any, between

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<PAGE>

                  (a)   the aggregate of the amounts payable in connection with
                        the Facility at that time and the costs and expenses
                        incurred by the Pledgee hereunder prior to that time,
                        and

                  (b)   the proceeds of disposition received by the Pledgee
                        prior to that time from a disposition of the Collateral

                  shall be paid by the Pledgor to the Pledgee forthwith after
                  demand therefore has been made by Pledgee on the Pledgor
                  together with interest thereon at the Default Rate charged by
                  the Pledgee at that time in respect of any of the Obligations.

      10. Proceeds Held in Trust. All Proceeds which are monies collected or
received by the Pledgor in connection with the Collateral shall be received in
trust for the Pledgee and shall be forthwith paid to the Pledgee.

      11. Power of Attorney. The Pledgor hereby irrevocably nominates,
constitutes and appoints the Agent, its duly authorized officers and agents, and
any person further designated by the Agent as the true and lawful attorney of
the Pledgor for and in the name of the Pledgor to exercise all or any of the
powers hereby conferred on the Pledgee and generally to use the name of the
Pledgor in the exercise of all such powers

      12. Security Additional. This Agreement and the security hereby
constituted is in addition to and not in substitution for any other agreement
between the parties creating a security interest in all or any part of the
Collateral whether heretofore or hereafter made and the terms of such other
agreement or agreements shall be deemed to be continued unless expressly
provided to the contrary in writing and signed by the parties.

      13. Further Assurances. The Pledgor shall do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered, such further
acts, deeds, mortgages, transfers, consents, powers of attorney, approvals and
assurances as the Pledgee shall reasonably require for the better assuring,
pledging, hypothecating, assigning and confirming unto the Pledgee the
Collateral or property intended to be pledged, hypothecated or assigned
hereunder or which the Pledgor may hereafter become bound to pledge, hypothecate
or assign in favor of the Pledgee for the purpose of accomplishing and effecting
the intention of this Agreement.

      14. Rights Cumulative. All rights and remedies of the Pledgee set out in
this Agreement and in the Loan Documents and in all other agreements,
instruments and documents delivered pursuant to or in connection with the Loan
Documents shall be cumulative and no right or remedy contained herein or therein
is intended to be exclusive but each shall be in addition to every other right
or remedy contained herein or therein or in any existing or further security
document entered into between the Pledgor and the Pledgee or presently or
hereafter existing at law or in equity or by statute. The taking of a judgment
or judgments shall not operate as a merger of any of the covenants contained in
this Agreement.

                                       8
<PAGE>

      15. No Waiver. No course of dealing between the Pledgor and the Pledgee
nor any failure to exercise, nor any delay in exercising, any right, power or
privilege of the Pledgee hereunder or under the Loan Documents or under any
other agreement, instrument or document delivered pursuant to or in connection
with the Loan Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

      16. No Obligation to Advance. Neither the execution of nor the delivery of
this Agreement shall of itself obligate the Pledgee to advance or to continue to
advance any monies to the Pledgor.

      17. Notices. Unless otherwise specified herein all notices, requests,
demands or other communications to or from the parties hereto shall be in
writing and shall be given in accordance with the notice provisions of the Loan
Documents.

      18. Miscellaneous.

      (i) In the event that any provision or any part of any provision hereof is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by a court, this Agreement shall be construed as
not containing such provision or such part of such provision and the invalidity
of such provision or such part shall not affect the validity of any other
provision or the remainder of such provision hereof and all of the provisions
hereof which are otherwise lawful and valid shall remain in full force and
effect.

      (ii) The section headings in this Agreement are for convenience only and
shall be without any substantive meaning whatsoever.

      (iii) This Agreement and the rights and obligations of the Pledgor
hereunder may not be assigned by the Pledgor without the prior consent in
writing of the Pledgee.

      (iv) This Agreement and all of its provisions shall inure to the benefit
of and bind the Pledgee and their successors and assigns, shall inure to the
benefit of the Pledgor and its successors and permitted assigns, and shall be
binding upon the Pledgor and its successors and assigns.

      (v) This Agreement may only be amended, varied, modified or supplemented
by an agreement in writing signed by each of the parties hereto.

      19. GOVERNING LAW, SEVERABILITY. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREUNDER. WHERVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS

                                       9
<PAGE>

AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, 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.

      20. JURY TRIAL. THE PLEDGOR AND THE PLEDGEE (BY ACCEPTANCE OF THIS
AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE PLEDGEE RELATING TO THE ADMINISTRATION OF THE LOAN
OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREE THAT NEITHER PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE PLEDGOR HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE PLEDGOR CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF THE PLEDGEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
LOAN WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE PLEDGEE TO ACCEPT
THIS AGREEMENT.

      IN WITNESS WHEREOF, the Pledgor has caused this Agreement to have been
duly executed and delivered, all as of the day and year first written above.

                                        MIKRON INFRARED, INC.

                                        By:_____________________________________
                                               Gerald D. Posner, President

                                       10

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