Exhibit 10.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO JMAR TECHNOLOGIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 240,000 Shares of Common Stock of
JMAR TECHNOLOGIES, INC.
(subject to adjustment as provided herein)
FORM OF COMMON STOCK PURCHASE WARRANT

No. 2006-2   Issue Date: March 28, 2006      

          JMAR TECHNOLOGIES, INC., a corporation organized under the laws of the
State of Delaware (the “Company”), hereby certifies that, for value received,
LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company (as defined herein) from and
after the Issue Date of this Warrant and at any time or from time to time before
5:00 p.m., New York time, through the close of business March 27, 2016 (the
“Expiration Date”), up to 240,000 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), $0.01 par value per share, at the applicable
Exercise Price per share (as defined below). The number and character of such
shares of Common Stock and the applicable Exercise Price per share are subject
to adjustment as provided herein.
          As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
     (a) The term “Company” shall include JMAR TECHNOLOGIES, INC. and any person
or entity which shall succeed, or assume the obligations of, JMAR TECHNOLOGIES,
INC. hereunder.
     (b) The term “Common Stock” includes (i) the Company’s Common Stock, par
value $0.01 per share; and (ii) any other securities into which or for which any
of the securities described in the preceding clause (i) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
     (c) The term “Other Securities” refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise)
Warrant

 

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which the holder of the Warrant at any time shall be entitled to receive, or
shall have received, on the exercise of the Warrant, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 4 or otherwise.
     (d) The “Exercise Price” applicable under this Warrant shall be a price of
$0.01 for all shares acquired hereunder.
          1. Exercise of Warrant.
              1.1 Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in part, by
delivery of an original or fax copy of an exercise notice in the form attached
hereto as Exhibit A (the “Exercise Notice”), up to 240,000 shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4.
Notwithstanding the foregoing, no shares of Common Stock may be purchased under
this Warrant until the first anniversary of the Issuance Date (“Anniversary
Date”) and thereafter the number of shares of Common Stock that may be purchased
upon exercise of this Warrant shall be equal to (a) eight percent (8%) of the
average daily balance under the Secured Non-Convertible Revolving Note, dated
March 27, 2006, divided by (b) the greater of (i) the average of the closing
prices of the Common Stock for the three trading days prior to the Anniversary
Date, and (ii) $1.00 per share.
              1.2 Fair Market Value. For purposes hereof, the “Fair Market
Value” of a share of Common Stock as of a particular date (the “Determination
Date”) shall mean:
     (a) If the Company’s Common Stock is traded on the American Stock Exchange
or another national exchange or is quoted on the National or Capital Market of
The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
     (b) If the Company’s Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is traded on the NASD
Over The Counter Bulletin Board, then the mean of the average of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
     (c) Except as provided in clause (d) below, if the Company’s Common Stock
is not publicly traded, then as the Holder and the Company agree or in the
absence of agreement by arbitration in accordance with the rules then in effect
of the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided.
     (d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or winding up
pursuant to the Company’s charter, then all amounts to be payable per share to
holders of the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common

          Warrant   2    

 

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Stock in liquidation under the charter, assuming for the purposes of this clause
(d) that all of the shares of Common Stock then issuable upon exercise of the
Warrant are outstanding at the Determination Date.
              1.3 Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
              1.4 Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of this Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
          2. Procedure for Exercise.
              2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
          2.2 Exercise.
     (a) Payment may be made either (i) in cash or by certified or official bank
check payable to the order of the Company equal to the applicable aggregate
Exercise Price, (ii) by delivery of shares of Common Stock with each share
valued at the Fair Market Value, or (iii) by a combination of any of the
foregoing methods, for the number of Common Shares specified in such Exercise
Notice (as such exercise number shall be adjusted to reflect any adjustment in
the total number of shares of Common Stock issuable to the Holder pursuant to
the terms of this Warrant) and the Holder shall thereupon be entitled to receive
the number of duly authorized, validly issued, fully-paid

          Warrant   3    

 

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and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.
(b) Notwithstanding this Section 2.2, the Holder hereby agrees not to exercise
this Warrant and sell the shares delivered to it upon such exercise in an amount
greater than ten percent (10%) of the daily weighted average trading volume of
the Common Stock on the date of such sale.
          3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
              3.1 Reorganization, Consolidation, Merger, Etc. In case at any
time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
              3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder.
              3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company’s
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by
Section 3.2.

          Warrant   4    

 

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          4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock issued by the Company,
(b) subdivide its outstanding shares of Common Stock, (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then Exercise
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such event and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such event, and the product so obtained shall thereafter be the Exercise
Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events described
herein in this Section 4. The number of shares of Common Stock that the holder
shall thereafter, on the exercise hereof as provided in Section 1, be entitled
to receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise (taking into account the provisions of this
Section 4).
          5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).
          6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
          7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a “Transferor”) in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor’s
endorsement in the form of Exhibit B attached hereto (the “Transferor
Endorsement Form”) and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor’s counsel (at
the Company’s expense) that

          Warrant   5    

 

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such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense (but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a “Transferee”), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
          8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
          9. Registration Rights. The Holder has been granted certain
registration rights by the Company. These registration rights are set forth in a
Registration Rights Agreement entered into by the Company and Holder dated as of
the date hereof, as the same may be amended, modified and/or supplemented from
time to time.
          10. Maximum Exercise. Notwithstanding anything herein to the contrary,
in no event shall the Holder be entitled to exercise any portion of this Warrant
in excess of that portion of this Warrant upon exercise of which the sum of
(1) the number of shares of Common Stock beneficially owned by the Holder and
its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the
Warrant or the unexercised or unconverted portion of any other security of the
Holder subject to a limitation on conversion analogous to the limitations
contained herein) and (2) the number of shares of Common Stock issuable upon the
exercise of the portion of this Warrant with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its Affiliates of any amount greater than 4.99% of the then
outstanding shares of Common Stock (whether or not, at the time of such
exercise, the Holder and its Affiliates beneficially own more than 4.99% of the
then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
person or entity, as such terms are used in and construed under Rule 144 under
the Securities Act. For purposes of the proviso to the second preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
limitations set forth herein (x) may be waived by the Holder upon provision of
no less than seventy-five (75) days prior notice to the Company and (y) shall
automatically become null and void following notice to the Company upon the
occurrence and during the continuance of an Event of Default (as defined in the
Security Agreement dated as of the date hereof among the Holder, the Company and
various subsidiaries of the Company (as amended, modified, restated and/or
supplemented from time to time, the “Security Agreement”)), except that at no
time shall the number of shares of Common Stock beneficially owned by the Holder
exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding
anything contained herein

          Warrant   6    

 

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to the contrary, the number of shares of Common Stock issuable by the Company
and acquirable by the Holder at a price below $1.05 per share pursuant to the
terms of this Warrant, the Security Agreement, any Ancillary Agreement (as
defined in the Security Agreement) or otherwise, shall not exceed an aggregate
of 7,011,900 shares of Common Stock (subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations affecting the Common
Stock) (the “Maximum Common Stock Issuance”), unless the issuance of Common
Shares hereunder in excess of the Maximum Common Stock Issuance shall first be
approved by the Company’s shareholders. If at any point in time and from time to
time the number of shares of Common Stock issued pursuant to the terms of this
Warrant, the Security Agreement, any Ancillary Agreement (as defined in the
Security Agreement) or otherwise, together with the number of shares of Common
Stock that would then be issuable by the Company to the Holder in the event of a
conversion pursuant to the terms of this Warrant, the Security Agreement, any
Ancillary Agreement (as defined in the Security Agreement) or otherwise, would
exceed the Maximum Common Stock Issuance but for this Section 10, the Company
shall promptly call a shareholders meeting to solicit shareholder approval for
the issuance of the shares of Common Stock hereunder in excess of the Maximum
Common Stock Issuance.
          11. Warrant Agent. The Company may, by written notice to the each
Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
          12. Transfer on the Company’s Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
          13. Notices, Etc. All notices and other communications from the
Company to the Holder shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder who has so furnished an
address to the Company.
          14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
WARRANT SHALL BE BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL
COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY
CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW
YORK. The individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys’ fees and costs. In the event that any provision of this

          Warrant   7    

 

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Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company
acknowledges that legal counsel participated in the preparation of this Warrant
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Warrant to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]           Warrant   8    

 

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          IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.

                      JMAR TECHNOLOGIES, INC.
 
           
WITNESS:
           
 
           
 
      By:   /s/ Dennis E. Valentine
 
           
 
      Name:   Dennis E. Valentine
 
           
/s/ Gary Klement
      Title:   Chief Financial Officer
 
           

          Warrant   9    

 

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EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)

         
TO:
  JMAR Technologies, Inc.    
 
       
 
 
 
   
 
 
 
   

Attention:     Chief Financial Officer
          The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.___), hereby irrevocably elects to purchase (check applicable box):
                                          shares of the common stock covered by
such warrant; or
          The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Warrant, which is
$                    . Such payment takes the form of (check applicable box or
boxes):
                              $                      in lawful money of the
United States; and/or
                              the cancellation of a total of
                     shares of Common Stock (using a Fair Market Value of
$                     per share for purposes of this calculation).
          The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to                                         
                                                              whose address is
                                                                                
                                                                              
                                         .
          The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from
registration under the Securities Act.

                                 
Dated:
                                                                         
(Signature must conform to name of holder as specified on the face of the
Warrant)
 
                  Address:        
 
                             
 
                               
 
                             

          Warrant   10    

 

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EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
          For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading “Transferees” the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of JMAR TECHNOLOGIES, INC. into which the within Warrant
relates specified under the headings “Percentage Transferred” and “Number
Transferred,” respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of JMAR
TECHNOLOGIES, INC. with full power of substitution in the premises.

                      Percentage   Number Transferees   Address   Transferred  
Transferred
 
           

                 
Dated:
                                          (Signature must conform to name of
holder as specified on the face of the Warrant)
 
          Address:    
 
               
 
               
 
               
 
                            SIGNED IN THE PRESENCE OF:                
 
                            (Name)

ACCEPTED AND AGREED:
[TRANSFEREE]

     
 
(Name)
   

          Warrant   11