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                          TECHNOLOGY LICENSE AGREEMENT

                                     Between

     Honeywell International Inc. and Honeywell Intellectual Properties Inc.

                                       And

                              Laser Energetics Inc.

Relating to R-Line Optical Pumping of Alexandrite Lasers Using Semiconductor
Diode Lasers

                              Dated: March 23, 2000

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                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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                                TABLE OF CONTENTS

PREAMBLE.......................................................................3

RECITALS.......................................................................3

1.     DEFINITIONS.............................................................3

2.     LICENSE GRANT; CONFIDENTIALITY..........................................3

3.     REPRESENTATIONS AND WARRANTIES; PATENT INDEMNITY; DISCLAIMERS;
       TERMINATION.............................................................3

4.     COMPENSATION............................................................3

5.     CODE OF CONDUCT AND PROPER BUSINESS PRACTICES...........................3

6.     INTERPRETATION AND ENFORCEMENT..........................................3

7.     MISCELLANEOUS...........................................................3

8.     ENTIRE AGREEMENT........................................................3

SIGNATORIES....................................................................3

EXHIBIT A......................................................................3

EXHIBIT B......................................................................3

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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                          Technology License Agreement

Preamble

      This Technology License Agreement ("Agreement") is made effective March
21, 2000 ("Effective Date") by and between Honeywell International Inc., a
Delaware corporation acting through its Defense Avionics Systems business unit
having an office at 699 Route 46 East, Teterboro, NJ 07608 and Honeywell
Intellectual Properties Inc., an Arizona corporation having an office at 8440
South Hardy Drive, Tempe, Arizona 85285 (collectively referred to as
"Honeywell"), and Laser Energetics Inc., a Florida corporation having a place of
business at 4044 Quaker Bridge Road, Mercerville, NJ 08619 (referred to as
"Licensee"). Honeywell and Licensee hereinafter may also be referred to
collectively as "Parties" and separately as a "Party".

Recitals

      WHEREAS, Honeywell is in possession of at least license rights in the
invention disclosed in Invention Record P.D. File 82-2716 entitled "R-Line
Optical Pumping of Alexandrite Lasers Using Semiconductor Diode Lasers"
("Invention Record") attached hereto as Exhibit A and claimed in U.S. Patent
Nos. 5,488,626 and 6,009,114, (such license rights being referred to herein as
"Invention Rights") and

      WHEREAS, Licensee is interested in receiving, and Honeywell is interested
in transferring to Licensee, certain rights in Honeywell's Invention Rights
under mutually agreed upon terms and conditions.

      NOW THEREFORE, in consideration of the mutual covenants, promises and
conditions set forth in this Agreement, the sufficiency of which is hereby
acknowledged, the Parties agree as follows:

1.    Definitions

As used herein, the terms below have the following meanings. Any such terms,
unless the context otherwise requires, may be used in the singular or the
plural, depending upon the reference.

      1.1 "Cash Payment" shall mean any and all sublicense fees or other similar
consideration paid to Licensee under Sublicenses that Licensee secures under
this Agreement.

      1.2 "Royalties" shall mean any and all running royalties or other similar
consideration paid under Sublicenses secured by Licensee pursuant to this
Agreement.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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      1.3 "Sublicensee" shall mean the person or entity who is granted by
Licensee a sublicense to use the Invention Rights to make, use, and sell the
Licensed Products in accordance with this Agreement.

      1.4 "Sublicense" shall mean any and all sublicenses granted by Licensee to
the Sublicensees of the right and license to use the Invention Rights for the
sale of the Licensed Products pursuant this Agreement.

      1.5 "Licensed Product" means the products listed in Exhibit B, the sale of
which by Licensee or its Sublicensees, would, but for rights, licenses, and
sublicenses granted pursuant to this Agreement, constitute infringement or
unauthorized use of any of the Invention Rights.

      1.6 "Net Selling Price" means, with respect to a Licensed Product sold,
leased, exchanged, or put into use,

            (a)   if the sale or transfer is between Licensee or its
                  Sublicensee, as the case may be, and an unaffiliated buyer in
                  an arm's length sale or transfer for such Licensed Product,
                  the selling price (or value of property or consideration
                  received if not cash) actually obtained by Licensee or its
                  Sublicensee from an unaffiliated buyer in the form in which it
                  is sold, whether or not assembled (and without excluding
                  therefrom any components or subassemblies which are included
                  in such selling price);

            (b)   if the sale or transfer is between Licensee or its
                  Sublicensee, as the case may be, and any of its affiliates for
                  resale to a buyer unaffiliated with Licensee or its
                  Sublicensee and their affiliates, the selling price shall be
                  the actual selling price to such unaffiliated buyer; or

            (c)   for all sales or transfers other than 1.4 (a) and (b)
                  including a sale or transfer between Licensee or its
                  Sublicensee, as the case may be, and a buyer in any other
                  manner other than in an arm's length sale, (i) the selling
                  price of such licensed product which Licensee or its
                  Sublicensee charged when last selling such Licensed Products
                  per se and in comparable quantities; (ii) if Licensee or its
                  Sublicensee has not previously sold such Licensed Product per
                  se or has done so only in quantities which are not comparable
                  to the quantities of such Licensed Products, then the selling
                  price shall be the publicly available selling price, in
                  comparable quantities, charged by a third party which sells
                  substantially the same such product, or the average publicly
                  available selling price of third parties selling substantially
                  the same product if it is sold by more than one third party;
                  or (iii) if substantially the same product is not being sold
                  by a third party, then the selling price shall be 200% of
                  Licensee's or its Sublicensee's fully burdened direct
                  manufacturing cost for such Licensed Product;

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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including in (a), (b) and (c) billings for sales or lease commissions and normal
packaging and less in (a), (b) and (c), the following to the extent invoiced and
actually paid or allowed by Licensee:

                        (i)   extra packaging charges caused by special customer
                              requests;

                        (ii)  usual trade discounts allowed to unaffiliated
                              persons or entities;

                        (iii) returns and allowances;

                        (iv)  transportation and directly related duties; and

                        (v)   excise and sales taxes.

      1.7 "Term" of this Agreement shall mean the period beginning on the
Effective Date and continuing until and including the Termination Date.

      1.8 "Termination Date" shall mean the termination date of this Agreement.
Unless this Agreement is terminated earlier in accordance with one or more
provisions of this Agreement, the Termination Date shall be the expiration date
of U.S. Patent No. 5,488,626 and 6,009,114.

      1.9 "Territory" shall mean the United States.

2.    License Grant; Confidentiality

            2.1 Conveyance. Honeywell grants to Licensee a personal,
      nontransferable (except as provided in Paragraph 6.4.1) exclusive,
      royalty-bearing license in the Territory under the Invention Rights to
      practice the technology described in the Invention Record and to sell
      Licensed Products. Effective upon Honeywell being named the record owner
      of U.S. Patent Nos. 5,488,626 and 6,009,114, as evidenced by USPTO
      records, Honeywell hereby grants to Licensee a personal, royalty-bearing
      nontransferable (except as provided in Paragraph 6.4.1) exclusive, fully
      paid-up right in the Territory to sublicense others under the Invention
      Rights to practice the technology described in the Invention Record and to
      sell Licensed Products. Honeywell hereby acknowledges its intent to take
      the reasonable steps to become the owner of record of U.S. Patent Nos.
      5,488,626 and 6,009,114.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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      Prior to Licensee entering Sublicenses under this Agreement, the parties
shall negotiate in good faith and mutually agreed on minimum sublicensing terms
and conditions to be included in all Sublicenses. Honeywell shall retain, and
does hereby retain, the exclusive right to enforce the Invention Rights and the
right to license the Invention Rights in connection with the settlement of any
enforcement of the Invention Rights against potential infringers. Upon
identifying a prospective Sublicensee, Licensee shall submit in writing to
Honeywell a term sheet delineating proposed terms and conditions of the
contemplated Sublicense. Honeywell hereby agrees to respond in writing within
ten (10) business days from the date of receipt of the term sheet. In the event
that Honeywell fails to respond within ten (10) days, such failure to respond
shall be deemed an acceptance of the terms detailed in the term sheet, and
Licensee shall be permitted to enter into a Sublicense with the Sublicensee on
those terms.

      2.2 Scope of License. No license, either express or implied, is granted by
Honeywell to Licensee hereunder with respect to any patent, trade secret,
information or intellectual property rights except as expressly stated above.

      2.3 Protection of Invention Rights. Honeywell shall at all times have the
sole right to take or not take whatever steps it deems necessary or desirable to
protect its rights in the Invention Rights.

      2.4 Patent Markings. Licensee shall mark all products made thereby or
therefor, which embodies the invention disclosed in the Invention Record and
claimed in U. S. Patent Nos. 5,488,626 and 6,009,114. If it is impractical to so
mark such products, then Licensee shall use reasonable efforts to so mark the
packages, containers, or documentation distributed with the products. Licensee
shall furnish to the Honeywell on request representative samples of patent
markings used thereby in connection with such products.

      2.5 Confidentiality. The Proprietary Information Exchange Agreement
entered between Honeywell and Licensee dated May 26, 1998 ("PIEA") is hereby
incorporated by reference and made a part hereof. In the event of a conflict
between the PIEA and this Agreement, the PIEA shall take precedence and control.

      2.6 Minimum Level of Performance. Effective upon Honeywell being named the
record owner of U.S. Patent Nos. 5,488,626 and 6,009,114 as evidenced by USPTO
records, Licensee shall be obligated to certain minimum performance obligations
to be negotiated in good faith by the parties consistent with the following:

            2.6.1 Licensee shall identify in writing to Honeywell Sublicensees
                  who are ready, able and willing to enter into Sublicenses;

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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            2.6.2 Licensee shall identify in writing to Honeywell potential
                  Sublicensees to which Licensee has actively marketed and
                  promoted the Invention Rights during the preceding year; and

            2.6.3 Licensee shall use all reasonable means to effectively promote
                  the sublicensing of the Invention Rights. These means shall
                  include, but are not be limited to the following:

                        a.    diligently and faithfully soliciting Sublicenses
                              for the Invention Rights;

                        b.    providing knowledgeable and trained personnel to
                              assist in the sublicensing of the Invention
                              Rights;

                        c.    making visits to potential Sublicensees from time
                              to time; and

                        d.    make quarterly reports to Honeywell regarding its
                              efforts and progress made towards sublicensing the
                              Invention Rights.

      3.    Representations and Warranties; Patent Indemnity; Disclaimers;
            Termination

                  3.1 Honeywell Representations and Warranties. Honeywell hereby
represents and warrants to Licensee, to Honeywell's knowledge, that it has the
right to grant to Licensee the rights and licenses granted herein and to enter
this Agreement; and Honeywell is receiving the Shares (as defined in Section
4.1) for investment purposes for its own account, and not with the view to or in
connection with any distribution thereof. Honeywell understands that the Shares
may not be sold, assigned, offered for sale, pledged or otherwise transferred
unless such transaction is registered under the Securities Act of 1933 and
applicable state securities laws, or exemptions from such registration
requirements are available or such requirements are not applicable.

                  3.2 Licensee Representation and Warranties. Licensee hereby
represents and warrants to Honeywell that, to Licensee's knowledge, Licensee has
the right to grant to Honeywell the rights granted herein and to enter this
Agreement. The authorized capital stock of Licensee consists of 25,000,000
shares of common stock, of which, on the date hereof, 4,344,580 shares are
issued and outstanding. The Shares (as defined in Section 4.1) have been validly
authorized and issued, are fully paid and nonassessable and have not been issued
in violation of any preemptive rights or of any federal or state securities
laws. In addition, options and contractual commitments exist relating to the
issuance of 440,000 shares of common stock. Exclusive of these 440,000 shares,

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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there is no security, option, warrant, right, call, subscription agreement,
commitment or understanding of any nature whatsoever to which Licensee is a
party, that directly or indirectly (i) calls for the issuance, sale, pledge or
other disposition of any shares of capital stock of Licensee or any securities
convertible into, or other rights to acquire, any shares of capital stock of
Licensee, (ii) obligates Licensee to grant, offer or enter into any of the
foregoing or (iii) relates to the voting or control of such capital stock,
securities or rights. Licensee has, and will transfer to Honeywell at the
Closing, good and valid title to the Shares, free and clear of any lien,
encumbrance, charge or other security interest, proxies and voting or other
agreements.

      3.3 Disclaimers. Honeywell does not make any representation to Licensee
regarding the scope, validity or enforceability of the Invention Rights. Other
than expressly provided in Paragraph 3.1 herein, Honeywell makes no
representations, extends no warranties of any kind and assumes no responsibility
or liability whatsoever with respect to the design, manufacture, assembly,
testing, sale, use or importation of any products or any portion thereof. THERE
ARE NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE, EVEN IF HONEYWELL HAS BEEN MADE AWARE OF SUCH PURPOSE, OR WARRANTIES
AGAINST INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, EVEN IF
HONEYWELL HAS BEEN MADE AWARE OF SUCH INFRINGEMENT. EXCEPT FOR CONFIDENTIALITY
OBLIGATIONS HEREUNDER, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE
TO THE OTHER OR ITS AFFILIATES FOR INDIRECT DAMAGES, INCLUDING ANY LOST PROFITS
OR OTHER INCIDENTAL OR CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT, INCLUDING
THE USE OR INABILITY TO USE ANY PATENT OR PRODUCTS. HONEYWELL'S TOTAL LIABILITY
IN THE AGGREGATE UNDER THIS AGREEMENT IS LIMITED TO AND SHALL NOT EXCEED THE
MONIES RECEIVED UNDER THIS AGREEMENT UP TO FIVE HUNDRED THOUSAND DOLLARS
(US$500,000).

3.4 Termination.

            3.4.1 Subject to the terms of Paragraph 3.4.3, Honeywell may
terminate this Agreement upon thirty (30) days prior written notice to Licensee
upon Licensee's default in the performance of the material terms, conditions,
obligations, undertakings, covenants or liabilities set forth herein. The
termination rights and remedies available to Honeywell provided herein are in
addition to all other rights and remedies available to Honeywell.

            3.4.2 Subject to the terms of Paragraph 3.4.3, Licensee may
terminate this Agreement upon thirty (30) days prior written notice to Honeywell
upon Honeywell's default in the performance of any of the material terms,
conditions, obligations, undertakings, covenants or liabilities set forth
herein. The termination rights and remedies available to Licensee provided
herein are in addition to all other rights and remedies available to Licensee.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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            3.4.3 If an event set forth in Paragraphs 3.4.1 or 3.4.2, above (a
"Default") occurs, the non-defaulting Party (the "Non-Defaulting Party") shall
provide written notice to the defaulting Party (the "Defaulting Party") of the
alleged occurrence of the event. The Defaulting Party shall have thirty (30)
days from the date that the notice was given in order to cure the Default. In
the event that the Default is not cured within the thirty (30) day period the
Non-Defaulting Party shall have the right to terminate the Agreement. Except as
otherwise provided in this Agreement, the Non-Defaulting Party's election to
terminate this Agreement in accordance with this Paragraph shall be without
prejudice to the Non-Defaulting Party's right to seek any and all additional
legal remedies to which it may be entitled as a result of the Default.

      4.    Compensation

      4.1 Initial License Fee under this Agreement. Licensee shall deliver to
Honeywell (1) upon execution of the Agreement, stock certificates in the name of
Honeywell International Inc. for twenty thousand (20,000) shares of common stock
for Laser Energetics Inc. having an agreed value as of the Effective Date of one
hundred thousand dollars (US$100,000) (the "Shares") and (2) on or before the
second anniversary of the Effective Date, a non-refundable, non-creditable, one
time, lump sum payment in the amount of five hundred thousand United States
dollars (US$500,000) ("Initial Payment").

      4.2 Further Payments under this Agreement.

            4.2.2 Licensee shall pay to Honeywell running royalties of any and
                  all Licensed Products which are sold, exchanged, leased or put
                  into first use by Licensee or its Sublicensees, which royalty
                  shall be at the rate of six (6%) applied to the Net Selling
                  Price of such Licensed Products.

            4.2.3 The first five hundred thousand dollars (US$500,000) in Cash
                  Payments received by Licensee under Sublicenses secured by
                  Licensee shall be paid to Honeywell, which Cash Payments shall
                  be creditable towards the Initial Payment until paid in full.
                  After the Initial Payment has been paid in full, Licensee
                  shall pay to Honeywell fifty percent (50%) of any Cash Payment
                  paid to Licensee under Sublicenses that Licensee secures.
                  Nothing contained in this Paragraph 4.2.3 shall relieve
                  Licensee from its obligation to pay to Honeywell the Initial
                  Payment in full on or before the second anniversary of the
                  Effective Date;

            4.2.4 Commencing on the third anniversary of the Effective Date and
                  each anniversary thereafter, Licensee shall pay to Honeywell
                  minimum, guaranteed, annual payments comprising Cash Payments
                  and Royalties in the amount of fifty thousand US dollars
                  (US$50,000) ("Annual Minimums"). Cash Payments creditable
                  towards the Initial Payment as set forth in Paragraph 4.2.3
                  shall not be creditable towards the Annual Minimums; and

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            4.2.5 In the event Honeywell grants a license to a potential
                  infringer under the Invention Rights in connection with the
                  settlement of an enforcement of the Invention Rights,
                  Honeywell agrees to share with Licensee the proceeds resulting
                  from such license after and less Honeywell's fair reasonable
                  costs and expenses associated with the enforcement effort as
                  follows:

                  (a)   Honeywell shall pay to Licensee fifty percent (50%) of
                        any initial payments made by the potential infringers
                        for a license under the Invention Rights, which shall be
                        creditable towards the Initial Payment until paid in
                        full; and

                  (b)   The first six percent (6%) of running royalties received
                        from a potential infringer for a license under the
                        Invention Rights shall belong exclusively to Honeywell.
                        Honeywell shall pay to Licensee a running of 50%
                        royalties received above and beyond six percent (6%) of
                        any and all Licensed Products which are sold, exchanged,
                        leased or put into first use by the potential infringer.

      4.3 Payment schedule, calculation and method of payments. Unless otherwise
expressly stated herein, all payments due and payable to Honeywell under this
Agreement shall be made in accordance with the following payment schedule,
calculation and method of payments:

            4.3.1 All royalties to Honeywell under Paragraph 4.2 of this
      Agreement are to be paid each calendar quarter within thirty (30) days
      following the end of such quarter.

            4.3.2 Commencing on the third anniversary of the Effective Date and
      within thirty (30) days after each anniversary of the Effective Date,
      Licensee shall pay to Honeywell the difference between the Annual Minimums
      and the actual payments made by Licensee during the twelve month period
      preceding the anniversary of the Effective Date (excluding Initial
      Payments and Cash Payments creditable towards the Initial Payment). In the
      event Licensee fails to timely pay the Annual Minimums and comply with its
      obligations under Paragraph 4.3.2, the exclusive licenses granted to
      Licensee hereunder shall automatically become non-exclusive and nothing
      contained hereunder shall prohibit Licensee from exploiting or licensing
      the Invention Rights without restriction.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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            4.3.3 All payments to Honeywell under Paragraph 4.2 of this
      Agreement shall be accompanied by a report showing information reasonably
      requested by Honeywell and reasonably necessary for Honeywell to calculate
      payments due from Licensee under this Agreement.

            4.3.4 Licensee shall pay interest to Honeywell at a rate of two
      percent (2%) over the prime per annum interest rate in the country of
      Licensee's domicile on any and all amounts that are at any time overdue
      and payable to Honeywell under this Agreement, such interest being
      calculated on each such overdue amount from the date when such amount
      became due to the date of actual payment thereof. The payment of such
      interest shall not replace any of Honeywell's other rights under this
      Agreement resulting from Licensee's default by failure to pay any amounts
      due hereunder.

            4.3.5 Licensee shall at all times during the life of this Agreement,
      and for three (3) years after termination, accumulate accurate and
      up-to-date records which will contain the complete data from which amounts
      due to Honeywell under this Agreement can be readily calculated, shall
      preserve and permit audits and examination of such records by Honeywell's
      representatives at reasonable intervals and under reasonable conditions
      during the life of this Agreement and for three (3) years thereafter, and
      shall supply to such Honeywell representatives upon request all
      information useful in making a proper audit and verification of Licensee's
      performance of its obligations under this Agreement. If an audit,
      examination or verification shows that Licensee has paid less than
      required under this Agreement, Licensee shall promptly pay the delinquent
      amount, together with late payment charges as set forth in Paragraph
      4.3.4. If the amount of underpayment exceeds ten percent (10%) of the
      amount that should have been paid, Licensee shall also pay the full cost
      of the audit described in this Paragraph 4.3.5.

      4.4 All amounts payable to Honeywell under this Agreement are to be paid
in U.S.A. currency. Payments shall be made by electronic wire transfer as
follows:

                      Mellon Bank
                      Pittsburgh, PA
                      ABA 043000261
                      Honeywell Intellectual Properties Inc.
                      Account Number 009-7594
                      Advice: AE-O-716

5.    Code of Conduct and Proper Business Practices

      5.1 Licensee agrees that it shall take no action or use or spend any
funds, regardless of source, in violation of the laws of the United States of
America or any country or countries in which it performs under this Agreement,
including but not limited to the payment of bribes, kickbacks, political
contributions, or other prohibited payments.

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      5.2 Licensee certifies that Honeywell has provided Licensee a copy of, and
that Licensee has read, understands and agrees to abide by the provisions of,
the Honeywell Code of Conduct and the United States Foreign Corrupt Practices
Act ("FCPA"), as amended, 15 USC sections 78(m)b, 78dd-1, 78dd-2, 78ff(c).

      5.3 Documentation of all business transactions shall properly describe the
pertinent events and such records must not be false, distorted or misleading. No
undisclosed or unrecorded fund or asset shall be established for any purpose.

      5.4 LICENSEE agrees to indemnify, defend and hold harmless Honeywell from
and against any and all demands, claims, suits, causes of action, liability,
losses, costs, expenses, settlements, and judgements (collectively "Claims"),
whether arising in equity, at common law, or by statute or regulation of any
country, or under the law of contract, or torts based upon, in connection with,
relating to or arising out of Licensee's failure to perform in accordance with
this Paragraph 5.

6.    Interpretation and Enforcement

      6.1 Relationship of Parties. The relationship between Honeywell and
Licensee is that of licensor and licensee. This Agreement does not create the
relationship of principal and agent between Honeywell and Licensee for any
purpose whatsoever. This Agreement shall not be construed as constituting
Licensee and Honeywell as partners, joint ventures, or as creating any other
form of legal association, franchise or arrangement which would impose liability
upon one Party for the act or omission of the other Party. Neither Party is
granted any express or implied right of authority by the other Party to assume
or to create any obligation or responsibility on behalf of or in the name of the
other Party, or to bind the other Party in any manner or thing whatsoever,
except as otherwise expressly stated herein.

      6.2 Government Regulations. This Agreement is subject to all applicable
laws and regulations of the U.S. Government and foreign governments. Each Party
shall be responsible for obtaining any necessary import licenses, export
licenses or other governmental authorizations required in connection with any
disclosure by it under this Agreement, including disclosures to foreign
nationals located within a facility of a Party hereto, as the case may be.
Furnishing of information shall be subject to prior receipt of all necessary
governmental approvals.

      6.3 No Interest in Honeywell. Licensee is not investing in or obtaining
any debt or equity interest in Honeywell under the terms of this Agreement.

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      6.4 Assignment.

            6.4.1 Licensee shall not assign or otherwise transfer, in whole or
      part, its rights and obligations under Agreement, except in connection
      with a sale of all or substantially all of its business or assets, without
      the prior written consent of Honeywell, which consent shall not be
      unreasonably withheld.

            6.4.2 In the event assignment takes place in accordance with
      Paragraph 6.4.1, this Agreement shall be binding upon and inure to the
      benefit of the successors and assigns of the respective Parties hereto.

      6.5 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
facsimile transmission, commercial courier, or certified, registered or express
mail, postage prepaid and return receipt requested. Any such notice shall be
deemed given when so delivered personally or sent by express mail or commercial
courier; or, if mailed certified or registered, two (2) business days after the
date of deposit in the United States mail; or, if sent by facsimile
transmission, when actually received; addressed as follows:

      If to Licensee to:

             Licensee
             Laser Energetics Inc.
             4044 Quaker Bridge Road
             Mercerville, NJ  08619
             Attention: Robert D. Battis
                        President & CEO
             Facsimile: (609) 587-9315
             Telephone: (609) 587-8250

             With a copy to:

             Stark & Stark
             P.O. Box 5315
             Princeton, NJ 08543-5315
             Attn.: Rachel Lilienthal Stark

      If to Honeywell to:

             Honeywell Intellectual Properties Inc.
             8440 South Hardy Drive
             P.O. Box 22322
             Tempe, AZ 85285, USA
             Attention: President
             Facsimile: 480-592-3107
             Telephone: 480-592-3101

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

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             Honeywell Defense Avionics Systems
             699 Route 46 East
             Teterboro, NJ 07608, USA
             Attention: Assistant General Counsel - Intellectual Property
             Facsimile: (201) 393-6564
             Telephone: (201) 393-2941

      6.6 Severability. The invalidity or unenforceability of any section or
provision of this Agreement shall not affect the validity or enforceability of
any one or more of the other sections or provisions. If any section or provision
herein is held to be unenforceable for any reason, this Agreement shall be
adjusted rather than voided, in order to achieve the intent of the parties to
the extent possible. In that event, all other sections and provisions herein
shall be deemed valid and enforceable to the fullest extent permitted by
applicable law.

      6.7 Controlling Law and Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of law.

      6.8 Arbitration.

            6.8.1 "Dispute" shall be defined as any controversy, claim or
      dispute arising out of or relating to this Agreement or the transactions
      contemplated thereby, or the breach, termination, enforcement,
      interpretation or validity thereof, including the determination of the
      scope or applicability of this Agreement to arbitrate and the nature and
      amount of any damages available to either Party as a result of any breach
      of this Agreement by the other Party. Notwithstanding the termination of
      this Agreement, in the event of any Dispute, the Parties shall attempt to
      reach an amicable settlement. Failing such settlement, the Dispute shall
      be settled by arbitration in New Jersey in accordance with the Commercial
      Arbitration Rules of the American Arbitration Association. The arbitration
      shall be conducted in the English language. The arbitration will be before
      a sole arbitrator, provided, however, that if the Parties are unable to
      agree upon a single arbitrator within twenty-five (25) days of the request
      for arbitration, then each Party shall select an arbitrator within
      twenty-five (25) days thereafter and the arbitrators so selected shall in
      turn select a third arbitrator within ten (10) days of their respective
      selections.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 14
<PAGE>

            6.8.2 No arbitrator shall be a current or former officer, employee,
      director, or affiliate of any Party hereto or of its affiliates or any
      other Representative and shall not otherwise have any interest in either
      Party.

            6.8.3 Any Party may seek interim or provisional relief from any
      court that is necessary to protect the rights or property of that Party,
      pending the appointment of the arbitrator(s) or pending the arbitrator's
      determination of the merits of the controversy.

            6.8.4 With respect to any Dispute that involves an issue regarding a
      sum of money, each Party shall submit to the arbitrator(s) the amount of
      money that the Party believes is the correct sum, along with an
      explanation of how the Party determined the amount. The arbitrator's
      determination shall be limited to choosing between the amounts submitted
      by the Parties. The arbitrator(s) shall not have the ability to choose an
      amount other than one of the amounts submitted by one of the Parties.

            6.8.5 The Parties shall bear their own costs and expenses, including
      attorneys' fees, but the arbitrator(s) may, in the award, allocate all of
      the administrative costs of the arbitration (and the mediation, if
      applicable), including the fees of the arbitrator and mediator, against
      the Party who did not prevail.

            6.8.6 The arbitration award shall be binding upon the parties
      hereto, shall be in writing and shall specify the factual and legal bases
      for the award. Judgment on the award may be entered in any court having
      jurisdiction.

            6.8.7 In no event shall the demand for arbitration be made after the
      date when institution of legal or equitable proceedings based on such
      claim, dispute or other matter in question shall be barred by the
      applicable statute of limitations.

            6.8.8 This Agreement to arbitrate shall be specifically enforceable
      under the prevailing arbitration law.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 15
<PAGE>

7.    Miscellaneous

      7.1 Public Announcement. All press releases and public announcements
relating to the matters contemplated by this Agreement shall be agreed to and
prepared jointly by the Parties. Notwithstanding anything herein to the
contrary, each Party is prohibited from using in advertising, publicity,
promotion, marketing, or other similar activity, any name, trade name,
trademark, or other designation including any abbreviation, contraction or
simulation of the other without the prior, express, written permission of the
other.

      7.2 Costs. Each Party shall each bear their own costs and expenses in
performing their respective obligations under this Agreement.

      7.3 Survival. The terms and conditions of this Agreement regarding
confidentiality, payment, warranties, liability, indemnification and all others
that by their sense and context are intended to survive the execution, delivery,
performance, termination or expiration of this Agreement survive and continue in
effect.

      7.4 Reexport of Technical Data. Licensee acknowledges that any commodities
and/or technical data provided under this Agreement is subject to the Export
Administration Regulations ("the EAR") administered by the U.S. Commerce
Department and that any export or re-export thereof must be in compliance with
the EAR. Licensee agrees that it shall not export or reexport, directly or
indirectly, any commodities and/or technical data (or direct products thereof)
provided under this Agreement in any form to destinations in Country Groups D:1
or E:2, as specified in Supplement No. 1 to Part 740 of the EAR, and as modified
from time to time by the U.S. Department of Commerce, or to destinations that
are otherwise controlled or embargoed under U.S. law.

      7.5 Captions. The Section headings contained in this Agreement are for
purposes of reference only and shall not limit, or otherwise affect the
construction of any provisions of this Agreement.

      7.6 Waiver. Acceptance by either Party of any performance less than
required hereby shall not be deemed to be a waiver of the rights of such Party
to enforce all of the terms and conditions hereof. No waiver of any provision of
this Agreement shall be deemed to or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless reduced to writing and executed by the
Party making such waiver.

      7.7 Binding Effect. This Agreement shall be binding and inure to the
benefit of the Parties and their successors or assigns.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 16
<PAGE>

8.    Entire Agreement

      This Agreement and the Proprietary Information Exchange Agreement entered
by the Parties dated May 26, 1998 constitute the entire understanding and
agreement between the Parties relating to the subject matter hereof and
supersedes and cancels any and all previous or collateral agreements,
negotiations, commitments, representations or understandings between the Parties
in respect thereto. It may only be changed or supplemented by a written
amendment signed by the authorized representatives of the Parties. Each addendum
executed shall be considered part of this Agreement and the terms of each shall
control in the event of any inconsistency with the terms of this Agreement.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 17
<PAGE>

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives.

Signatories

Honeywell International Inc.                 Licensee

Signature: /s/                               Signature: /s/ Robert D. Battis
           ---------------------------                  ------------------------

By:                                          By:    Robert D. Battis
    ----------------------------------

Title:                                       Title: President & CEO
       -------------------------------

Date:                                        Date:  March 23, 2000
      --------------------------------

Honeywell Intellectual Properties Inc.

Signature: /s/
           ---------------------------

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

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

Date:
      --------------------------------

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 18
<PAGE>

                                    EXHIBIT A

                          Invention Record P.D. 82-2716

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 19
<PAGE>

                                    EXHIBIT B

                                LICENSED PRODUCTS

Lasers, laser subassemblies, and discrete laser components and devices in lasers
thereof.

                   HONEYWELL AND LASER ENERGETICS PROPRIETARY

                                    Page 20SECURITY AGREEMENT

      THIS SECURITY AGREEMENT, dated effective as of October 29, 2004 (this
"Security Agreement"), is entered into by and between Laser Energetics, Inc., a
Florida corporation (the "Borrower"), and Arisawa Manufacturing Co., Ltd., a
Japanese corporation (the "Secured Party").

                             PRELIMINARY STATEMENTS.

1. Reference is made to the secured promissory note dated effective as of
October 29, 2004 made by Borrower in favor of and delivered to Secured Party in
the original principal amount of US One Million Ninety-Nine Thousand Seven
Hundred Eighteen Dollars ($1,099,718.00) (as modified and supplemented and in
effect from time to time, the "Note"). Capitalized terms used in this Security
Agreement and not otherwise defined herein shall have the respective meanings
set forth in the Note. It is a condition precedent to the funding of the Note
that the Borrower shall have granted the security interest contemplated by this
Security Agreement.

      NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Party to provide the principal sum to Borrower, Borrower hereby
agrees as follows:

1. Grant of Security. The Borrower hereby grants to the Secured Party a security
interest in the following collateral of the Borrower (the "Collateral"):

      all inventory, work-in-progress, raw materials, equipment, accounts
      (including but not limited to all health-care-insurance receivables),
      chattel paper, instruments (including but not limited to all promissory
      notes), letter-of-credit rights, letters of credit documents, deposit
      accounts, investment property, money, other rights to payment and
      performance, and general intangibles (including but not limited to all
      software and all payment intangibles); and oil, gas and other minerals
      before extraction; all oil, gas, other minerals and accounts constituting
      as-extracted collateral; all fixtures; all timber to be cut; all
      attachments, accessions, accessories, fittings, increases, tools, parts,
      repairs, supplies, and commingled goods relating to the foregoing
      property, and all additions, replacements of and substitutions for all or
      any part of the foregoing property, all insurance refunds relating to the
      foregoing property; all good will relating to the foregoing property; all
      records and data and embedded software relating to the foregoing property;
      and all equipment, inventory and software to utilize, create, maintain and
      process any such records and data on electronic media; and all supporting
      obligations relating to the foregoing property; all whether now existing
      or hereafter arising, whether now owned or hereafter acquired or whether
      now or hereafter subject to any rights in the foregoing property; and all
      products and proceeds (including but not limited to all insurance
      payments) of or relating to the foregoing property (the "Business
      Assets"), and

      all letters patent of the United States, all right, title and interest
      therein and thereto, and all registrations and recordings thereof, which
      are described in Schedule 1(b) annexed hereto and made a part hereof, all
      reissues, continuations, continuations-in-part or extensions thereof and
      all licenses thereof, and all products and proceeds of or relating to the
      foregoing property (the "Patents").

<PAGE>

2. Security for Obligations. The Collateral secures the prompt and complete
payment when due of the outstanding principal and interest on the Note and all
other indebtedness and other obligations of the Borrower now or hereafter
existing under the Note including, without limitation, principal, interest,
fees, expenses, reasonable costs and expenses of enforcement, and reasonable
attorneys' fees and expenses (collectively, the "Secured Obligations").

3. Borrower Remains Liable. Anything herein to the contrary notwithstanding, the
Secured Party shall not have any obligation or liability, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Borrower
by reason of the security interest granted to the Secured Party as contemplated
by this Security Agreement.

4. Representations and Warranties. Borrower represents and warrants to the
Secured Party as follows:

The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida The chief place of business and
chief executive offices of the Borrower are located at the address(es) specified
on Schedule 4(a) hereto.

The Collateral constituting tangible personal property is located at, and at all
times while this Security Agreement remains in effect shall be located at, the
address(es) as specified on Schedule 4(b) hereto.

The Borrower owns its rights in the Collateral free and clear of any lien,
claim, encumbrance, license, right of first refusal or other restriction except
for the security interest created by this Security Agreement and the liens
specified on Schedule 4(c) hereto (the "Permitted Liens"). No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except for financing
statements filed in favor of the Secured Party relating to this Security
Agreement and the Permitted Liens.

The Borrower conducts no business under any name or trade name other than its
proper corporate name.

Except for the Permitted Liens, this Security Agreement creates a valid first
priority lien in the Collateral, securing the payment of the Secured
Obligations. All other actions necessary or desirable to create such security
interest have been duly taken.

No authorization, approval or other action by, and no notice to or filing with,
any governmental authority is required for the grant by the Borrower of the
security interest granted hereby or for the execution, delivery or performance
of this Security Agreement by the Borrower.

5. Further Assurances. The Borrower agrees that from time to time, at the
expense of the Borrower, the Borrower will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights

                                      -2-
<PAGE>

and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower shall execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Secured Party may
reasonably request, in order to perfect and preserve the security interest
granted or purported to be granted hereby. In addition, the Borrower shall
execute and file at the Secured Party's request any instruments or notices
required to be filed with the United States Patent and Trademark Office or any
other governmental office or agency to perfect and protect any security interest
granted or purported to be granted hereby. The Borrower agrees to give the
Secured Party notice of any new intellectual property rights related to the
Collateral.

The Borrower hereby authorizes the Secured Party to file one or more financing
or continuation statements, and amendments thereto pursuant to the Uniform
Commercial Code, relative to all or any part of the Collateral without the
signature of the Borrower where permitted by law. A carbon, photographic or
other reproduction of this Security Agreement, as executed by all parties, or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

The Borrower shall immediately notify the Secured Party, by written notice, if
at any time any material portion of the Collateral shall be moved or transferred
from, or no longer be located at, the address(es) as specified on Schedule 4(b)
hereto.

The Borrower shall defend the Collateral against all claims and demands of all
persons (other than the Secured Party) claiming an interest therein. The
Borrower shall pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims against, the
Collateral, except to the extent that there is a good faith contest of the
validity thereof.

6. Remedies. If any Event of Default (as defined in the Note) shall have
occurred and is then continuing, the Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "Code").

7. Amendments; Etc. No amendment or waiver of any provision of this Security
Agreement or consent to any departure by the Borrower herefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

8. Notices. All notices and other communications required or permitted hereunder
shall be in writing and shall be (i) mailed by registered or certified mail,
postage prepaid, (ii) delivered by reliable overnight courier service, or (iii)
otherwise delivered by hand or by messenger, addressed (A) if to the Lender, c/o
C.M. Peterson, 270 Drum Point Road, #3, Brick, New Jersey 08723, with a copy to
Baker & McKenzie, 815 Connecticut Avenue, NW, Washington, DC 20006-4078, Attn:
Kevin M. O'Brien, Esq., or (B) if to the Company, to 3535 Quakerbridge Road,
Suite 601, Mercerville, New Jersey 08619, Attn: Robert Dr. Battis, CEO, with a
copy to Stark & Stark, 993 Lenox Drive, Lawrenceville, New Jersey 08648, or at
such other address as the Company shall have furnished to the Purchaser in
writing. All such notices and communications shall be effective upon receipt.

                                      -3-
<PAGE>

9. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Collateral and shall (1) remain in full force and
effect until payment in full of the Secured Obligations, (2) be binding upon the
Borrower, its permitted successors and assigns, and (3) inure to the benefit of
the Secured Party and its permitted successors, transferees and assigns. Upon
the payment in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Borrower. Upon any such termination, the Secured Party shall, at the Borrower's
expense, promptly execute and deliver to the Borrower such documents as the
Borrower may reasonably request to evidence such termination.

10. Continuous Perfection. On March 31, 2004, Borrower issued its secured
convertible promissory note to Secured Party in the aggregate principal amount
of One Million Seventy Thousand Dollars ($1,070,000) (the "March 31 Note").
Simultaneously with the execution and delivery of the Note, the Secured Party
shall cancel the March 31 Note and the Borrower and the Secured Party shall
terminate the loan agreement between them dated March 31, 2004. The Collateral
securing the Note is exactly the same as the collateral that secured the March
31 Note. Secured Party filed a financing statement (number 20040655433X) April
2, 2004 in the State of Florida (the "Financing Statement") to perfect Secured
Party's security interest in and to the collateral which secured the obligations
of Borrower under the March 31 Note. Borrower and Secured Party intend for the
Secured Party to have and enjoy a continuously perfected security interest in
and to the Collateral notwithstanding the cancellation of the March 31 Note.
Borrower agrees that, notwithstanding the cancellation of the March 31 Note,
Secured Party shall not file any termination statement with respect to the
Financing Statement as a consequence of such cancellation. The parties intend
that the Financing Statement shall remain effective and continue to perfect the
security interest granted in the Collateral by this Security Agreement. On April
14, 2004, the United States Patent and Trademark Office recorded at reel/ frame
015201/0436 the security agreement by and between Borrower and Secured Party to
perfect Secured Party's security interest in and to the intellectual property
which secured the obligations of Borrower under the March 31 Note (the "Prior
Security Agreement"). The parties intend that Secured Creditor have and enjoy a
continuously perfected security interest in and to the intellectual property
covered by the Prior Security Agreement and this Security Agreement
notwithstanding the cancellation of the March 31 Note, and the parties shall
take any action required by Section 5 above to ensure the continuity of such
perfection.

                                      -4-
<PAGE>

11. Governing Law; Terms. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
NEW YORK STATE PRINCIPLES OF CONFLICT OF LAWS EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW JERSEY. Unless otherwise defined herein
or in the Note, terms used in Article 9 of the Uniform Commercial Code Law in
the State of New York are used herein as therein defined.

12. Miscellaneous. This Security Agreement is in addition to and not in
limitation of any other rights and remedies the Secured Party may have by virtue
of any other document executed by the Borrower or by law or otherwise. If any
provision of this Security Agreement is contrary to applicable law or general
principles of equity, such provision shall be deemed ineffective without
invalidating the remaining provisions hereof. The Secured Party shall not by any
delay or omission be deemed to have waived any of its rights or remedies
hereunder. A waiver by the Secured Party of any right or remedy hereunder on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy which the Secured Party would have had on any future occasion nor shall
the Secured Party be liable for exercising or failing to exercise any such right
or remedy.

                            [Signature page follows]

                                      -5-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered on the date first above written.

                                             LASER ENERGETICS, INC.

                                             By: /s/ Robert D. Battis
                                                 -------------------------------
                                                 Name: Robert D. Battis
                                                 Title: Founder, President & CEO

                                             ARISAWA MANUFACTURING CO., LTD.

                                             By: /s/ Sanji Arisawa
                                                 -------------------------------
                                                 Name: Sanji Arisawa
                                                 Title: President & CEO

<PAGE>

                                   SCHEDULE 1
                              To Security Agreement

                                     PATENTS

Patent No.   Title                                          U.S. Expiration Date

5,331,652    Solid State Laser having Closed Cycle Gas      March 2013
             Cooled Construction

5,235,606    Amplification of Ultrashort Pulses with Nd:    October 2011
             Glass Amplifiers Pumped by Alexandrite Free
             Running Laser

5,142,548    Broadband Tuning and Laser Line Narrowing      April 2010
             Utilizing Birefringent Laser Hosts

5,009,658    Dual Frequency Laser Lithotripter (1)          April 2009

4,949,346    Conductively Cooled, Diode-Pumped Solid        August 2009
             State Slab Laser

4,944,567    Laser Imaging Fiber Optic Delivery System      November 2007

4,933,946    Conductively Cooled Solid State Slab Laser     August 2009

4,858,242    Improved Unitary Solid-State Laser             March 2005

4,835,786    Unitary Solid State Laser                      March 2005

4,791,927    Dual-Wavelength Laser Scalpel Background of    December 2005
             the Invention

4,734,913    Unitary Solid-State Laser                      December 2005

4,713,824    Noble-Metal Overcoated, Front Surface          December 2004
             Silver Reflectors

4,713,820    Thermal Lensing-Compensated Lanthanum          August 2005
             Beryllate Laser

<PAGE>

Patent No.   Title                                          U.S. Expiration Date

5,321,711    Segmented Solid State Laser Gain Media with    August 2012
             Gradient Dopy Level

4,809,283    Method of manufacturing chromium-doped         Year 2006
             berylliym aluminate laser rod and lasers
             incorporating the rods therein

(1) Joint Ownership with Karl Storz Endoscopy

<PAGE>

                                   SCHEDULE 4
                              to Security Agreement

(a)   Place of Business (Chief Place of Business and Chief Executive Office):

      3535 Quaker Bridge Road, Suite 601, Mercerville, New Jersey 08619

(b)   Location of Collateral

      3535 Quaker Bridge Road, Suite 601, Mercerville, New Jersey 08619

(c)   Permitted Liens

      Commerce Bank (Business Assets) - maximum principal amount of $500,000.00

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