EX-10.1






Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 28, 2005, by and among
JMAR Technologies, Inc., a Delaware corporation, with headquarters located at 10905 Technology
Place, San Diego, California 92127 (the “Company”), and the investors listed on the Schedule of
Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).



WHEREAS:



A. The Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of
1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by
the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.



B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of shares of the Common Stock, par
value $0.01 per share, of the Company (the “Common Stock”), set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate amount shall collectively be referred to
herein as the “Common Shares”) and (ii) a warrant to acquire up to that number of additional shares
of Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (the
"Warrants”), in substantially the form attached hereto as Exhibit A (as exercised,
collectively, the “Warrant Shares”). The number of Warrants shall be equal to 70% of the number of
Common Shares purchased hereunder.



C. Contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B (the “Registration Rights Agreement”) pursuant to which the
Company has agreed to provide certain registration rights with respect to the Common Shares, and
the Warrant Shares under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.



D. The Common Shares, the Warrants and the Warrant Shares collectively are referred
to herein as the “Securities”.



NOW, THEREFORE, the Company and each Buyer hereby agree as follows:




	 	1.	 	PURCHASE AND SALE OF COMMON SHARES AND WARRANTS





(a) Purchase of Common Shares and Warrants.



Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below), the number of Common Shares as
is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers, along with the
Warrants to acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name
in column (4) on the Schedule of Buyers (the “Closing”). The Closing shall occur on the Closing
Date at the offices of Procopio, Cory, Hargreaves & Savitch LLP, 530 B Street, Suite 2100, San
Diego, California 92101.



(b) Purchase Price. The purchase price for the Common Shares and related Warrants to
be purchased by each Buyer at the Closing shall be the amount set forth opposite such Buyer’s name
in column (5) of the Schedule of Buyers (the “Purchase Price”). The Purchase Price shall be equal
to 90% of the volume weighted average price (as determined using the AQR function on the Bloomberg
terminal) of the Company’s Common Stock for all trades during the five (5) day trading period
through and including the Closing Date on the Principal Market (“VWAP Price”), but not in excess of
$1.20 per share (“Ceiling Price”) or lower than $1.10 per share (“Floor Price”). Based on the VWAP
Price and the Ceiling Price, the purchase price for the Common Shares is $1.20 per share and the
Warrant exercise price is $1.44 per share.



(c) Closing Date. The date and time of the Closing (the “Closing Date”) shall be 8:00
a.m., New York City Time, on the date hereof (or such other date and time as is mutually agreed to
by the Company and each Buyer).



(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price to the Company for the Common Shares and Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions, and (ii) the Company shall deliver to each Buyer (A) one or
more stock certificates, free and clear of all restrictive and other legends (except as expressly
provided in Section 2(g) hereof), evidencing the number of Common Shares such Buyer is purchasing
as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers and (B) a
Warrant pursuant to which such Buyer shall have the right to acquire such number of Warrant Shares
as is set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers, in all cases
duly executed on behalf of the Company and registered in the name of such Buyer.




	 	2.	 	BUYER’S REPRESENTATIONS AND WARRANTIES.





Each Buyer represents and warrants with respect to only itself that:



(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Common Shares and
the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable upon
exercise thereof, in the ordinary course of business for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant
to sales registered or exempted under the 1933 Act and such Buyer does not have a present
arrangement to effect any distribution of the Securities to or through any person or entity;
provided, however, that by making the representations herein, such Buyer does not
agree to hold any of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the
ordinary course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.



(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D.



(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.



(d) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk and is able to afford a complete loss
of such investment. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its acquisition of the
Securities.



(e) No Governmental Review. Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.



(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144
or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the Person (as defined in
Section 3(r)) through whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is
under any obligation to register the Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin account or other
loan secured by the Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Transaction Document, including, without
limitation, this Section 2(f); provided, that in order to make any sale, transfer or assignment of
Securities, such Buyer and its pledgee makes such disposition in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.



(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Common Shares and the Warrants and, until such time as the resale of the Common
Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the Warrant Shares, except as
set forth below, shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):



[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.



(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement have
been duly and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.



(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.



(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.




	 	3.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.





The Company represents and warrants to each of the Buyers that:



(a) Organization and Qualification. Each of the Company and its “Subsidiaries” (which
for purposes of this Agreement means any entity (i) in which the Company, directly or indirectly,
owns capital stock or holds an equity or similar interest and (ii) which has operations and
material assets) are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now being conducted. Each
of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a Material Adverse Effect. As used in
this Agreement, “Material Adverse Effect” means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability of the Company to
perform its obligations under the Transaction Documents (as defined below). The Company has no
Subsidiaries except JMAR Research, Inc., JMAR/SAL NanoLithography, Inc., and JSI Microelectronics,
Inc.



(b) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5), the Warrants and each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”)
and to issue the Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the issuance of the
Common Shares and the Warrants and the reservation for issuance and the issuance of the Warrant
Shares issuable upon exercise of the Warrant have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders. This Agreement and the other Transaction Documents have been duly
executed and delivered by the Company, and constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies.



(c) Issuance of Securities. The Common Shares and the Warrants are duly authorized
and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all
taxes, liens and charges with respect to the issue thereof and the Common Shares shall be fully
paid and nonassessable with the holders being entitled to all rights accorded to a holder of Common
Stock. As of the Closing Date, the Company shall have duly authorized and reserved for issuance a
number of shares of Common Stock which equals the number of Warrant Shares. The Company shall, so
long as any of the Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Capital Stock, solely for the purpose of effecting the
exercise of the Warrants, 100% of the number of shares of Common Stock issuable upon exercise of
the Warrants. Upon exercise in accordance with the Warrants, the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.
The issuance by the Company of the Securities is exempt from registration under the 1933 Act.



(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Common Shares and Warrants
and reservation for issuance and issuance of the Warrant Shares) will not (i) result in a violation
of the Restated Certificate of Incorporation (as defined below) or Bylaws (as defined below) of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the Principal Market) applicable
to the Company or any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected.



(e) Consents. Except for the filing of a Notice of Additional Listing with NASDAQ
(which the Company has filed with NASDAQ), the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court, governmental agency
or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date. The Company and its Subsidiaries are unaware
of any facts or circumstances that might prevent the Company from obtaining or effecting any of the
registration, application or filings pursuant to the preceding sentence. The Company is not in
violation of the listing requirements of the Principal Market and has no knowledge of any facts
that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable
future.



(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of arm’s length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer
is (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s decision to enter into
the Transaction Documents has been based solely on the independent evaluation by the Company and
its representatives.



(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim. The Company acknowledges that it has engaged Midtown Partners &
Co., LLC as placement agent in connection with the sale of the Securities (the “Agent”). Other
than the Agent, the Company has not engaged any placement agent or other agent in connection with
the sale of the Securities.



(h) No Integrated Offering. Except for the issuance in December, 2005 of $1,000,000
of Common Stock to Laurus Master Fund, Ltd. in exchange for the cancellation of the Company’s
Series E Convertible Preferred Stock (the “Laurus Issuance”), none of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of any of the Securities under the 1933 Act or
cause this offering of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated. The integration of the Laurus
Issuance with the offering of the Securities will not result in the loss of any exemption from
registration under the 1933 Act nor will it result in a requirement to obtain stockholder approval
under the Nasdaq Marketplace Rules. None of the Company, its Subsidiaries, their affiliates and
any Person acting on their behalf will take any action or steps referred to in this Section 3(h)
that would require registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings.



(i) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Restated Certificate of Incorporation
or the laws of the State of Delaware which is or could become applicable to any Buyer as a result
of the transactions contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities.



(j) SEC Documents; Financial Statements. During the two years prior to the date
hereof, the Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof or prior to the date of the Closing, and all
exhibits included therein and financial statements and schedules thereto and documents incorporated
by reference therein being hereinafter referred to as the “SEC Documents”). The Company has
delivered to the Buyers or their respective representatives true, correct and complete copies of
the SEC Documents not available on the EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information provided by or on behalf
of the Company to the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or were made, not
misleading.



(k) Absence of Certain Changes. Except as disclosed in Schedule 3(k), since
December 31, 2004, there has been no material adverse change and no material adverse development in
the business, properties, operations, condition (financial or otherwise), results of operations or
prospects of the Company or its Subsidiaries. Except as disclosed in Schedule 3(k), since
December 31, 2004, the Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $500,000 outside of the ordinary course of business
or (iii) had capital expenditures, individually or in the aggregate, in excess of $500,000. The
Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor
to do so. The Company is not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(k), “Insolvent” means (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as
defined in Section 3(r)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured,
(iii) the Company intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted or is about to be
conducted.



(l) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is contemplated to occur, with
respect to the Company or its Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to
an issuance and sale by the Company of its Common Stock and which has not been publicly announced.



(m) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries
is in violation of any term of or in default under the Certificate of Incorporation or Bylaws or
their organizational charter or bylaws, respectively. Neither the Company nor any Subsidiary is in
violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will
conduct its business in violation of any of the foregoing, except for possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or circumstances that would
reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. Since December 31, 2004, (i) the Common Stock has been designated for
quotation or listed on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) except as disclosed in Schedule 3(m), the
Company has received no communication, written or oral, from the SEC or the Principal Market
regarding the violation of a Nasdaq Marketplace Rule or the suspension or delisting of the Common
Stock from the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, except where the failure to possess
such certificates, authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate, authorization or
permit.



(n) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii) violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.



(o) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof, except where such noncompliance would not have, individually or in the aggregate,
a Material Adverse Effect.



(p) Transactions With Affiliates. Except as set forth in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2004, none of the officers, directors or employees of
the Company is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any such officer, director or employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner.



(q) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (x) 80,000,000 shares of Common Stock, of which as of the date hereof,
36,277,324 shares are issued and outstanding, 7,131,376 shares are reserved for issuance pursuant
to the Company’s employee incentive plan and other options and warrants outstanding and 3,925,000
shares are reserved for issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (y) 5,000,000 shares of
convertible preferred stock, of which as of the date hereof, 196,250, 196,250 and 392,500 shares of
Series F, G and H convertible preferred stock, respectively, are issued and outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as set forth above in this Section 3(q) or on Schedule 3(q): (i) no
shares of the Company’s capital stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness (as defined in Section 3(r)) of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there
are no financing statements securing obligations in any material amounts, either singly or in the
aggregate, filed in connection with the Company; (v) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the issuance of the
Securities; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans
or agreements or any similar plan or agreement; and (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents (as defined herein) but
not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the
Company’s or any Subsidiary’s respective businesses and which, individually or in the aggregate, do
not or would not have a Material Adverse Effect. The Company has furnished or made available to
the Buyer upon such Buyer’s request, true, correct and complete copies of the Company’s Restated
Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the
"Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for,
Common Stock and the material rights of the holders thereof in respect thereto. Schedule
3(q) sets forth the shares of Common Stock owned beneficially or of record and Common Stock
Equivalents (as defined below) held by each director and executive officer.



(r) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(r),
neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined
below), (ii) is a party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or instrument would result
in a Material Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv)
is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse
Effect. Except for Indebtedness not exceeding $3,000,000 owing from time-to-time to Laurus under
that certain Convertible Note, dated March 21, 2003, no outstanding Indebtedness is secured. For
purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of such indebtedness, and
(H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of such liability will
be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency thereof.



(s) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Common Stock or any of its Subsidiaries or any of the
Company’s or the Company’s Subsidiary’s officers or directors, whether of a civil or criminal
nature or otherwise.



(t) Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any Subsidiary has been refused any insurance
coverage sought or applied for. Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to continue its business at
a cost that would not have a Material Adverse Effect.



(u) Employee Relations. (i) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good. No executive officer of
the Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment with the Company. No
executive officer of the Company, to the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.



(ii) The Company and its Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.



(v) Title. The Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except for a security interest in substantially all of the
Company’s assets held by Laurus and except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.



(w) Intellectual Property Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property rights (“Intellectual
Property Rights”) necessary to conduct their respective businesses as now conducted. None of the
Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or
terminate within three years from the date of this Agreement, except for rights which are not
necessary to conduct its business as now conducted. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There
is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property
Rights. The Company is unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.



(x) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.



(y) Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
federal and state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.



(z) Internal Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to maintain asset and
liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in
accordance with management’s general or specific authorization and (iv) the recorded accountability
for assets and liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 under the 1934 Act) that
are effective in ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within
the time periods specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed in to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is accumulated and communicated
to the Company’s management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely decisions regarding
required disclosure.



(aa) Form S-3 Eligibility. The Company is eligible to register the Common Shares and
the Warrant Shares for resale by the Buyers using Form S-3 promulgated under the 1933 Act.



(bb) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.



(cc) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, other than the Agents’ placement of the
Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.



(dd) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or will have been
complied with.



(ee) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their respective agents or counsel with any
information that constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the Company. All disclosure
provided to the Buyers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each press release issued by the Company
during the twelve (12) months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any Subsidiary or either of its or their
respective business, properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s
reports filed under the Exchange Act of 1934, as amended, are being incorporated into an effective
registration statement filed by the Company under the 1933 Act). The Company acknowledges and
agrees that no Buyer makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in Section 2.




	 	4.	 	COVENANTS.





(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
covenants and the conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this
Agreement.



(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company, on or before the Closing Date, shall take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.



(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Common Shares and Warrant Shares and none of
the Warrants is outstanding (the “Reporting Period”), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.



(d) Use of Proceeds. The Company will use substantially all of the proceeds from the
sale of the Securities for 1) the start-up of the promotion, sale, and manufacturing of the
BioSentry products; and 2) engineering development, through Alpha Models, of the following future
new products: (a) Compact X-ray Microscope, and (b) X-ray Nano Probe. A portion of the proceeds
will also be used for general corporate purposes, including administration expenses.



(e) Financial Information. The Company agrees to send the following to each Investor
during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form
10-Q, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of
any notices and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the stockholders. As
used herein, “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.



(f) Listing. The Company shall promptly secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) upon each national securities exchange
and automated quotation system, if any, upon which shares of Common Stock are then listed (subject
to official notice of issuance) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all Registrable Securities from time to time issuable under the
terms of the Transaction Documents. The Company shall maintain the Common Stock’s authorization
for listing on the Principal Market. Neither the Company nor any of its Subsidiaries shall take
any action which would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 4(f).



(g) Fees. Subject to Section 8 below, at the Closing and subject to providing
supporting documentation, the Company shall reimburse up to $15,000 of the fees and expenses in
connection with the preparation, execution and performance of this Agreement and the transactions
contemplated hereunder, of the Agent or its designee(s), which amount shall be withheld by such
Buyer from its Purchase Price at the Closing. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby,
including, without limitation, any fees or commissions payable to the Agent. The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any
claim relating to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.



(h) Pledge of Securities. The Company acknowledges and agrees that the Securities may
be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including, without limitation, Section 2(f) of
this Agreement; provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) of this Agreement in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to
such pledgee by an Investor.



(i) Disclosure of Transactions and Other Material Information. The Company shall, on
or before 8:30 a.m., New York City Time, on the first Business Day after the date of this
Agreement, issue a press release (the “Press Release”) reasonably acceptable to the Buyers
disclosing all material terms of the transactions contemplated hereby. On or before 8:30 a.m., New
York City Time, on the third Business Day following the Closing Date, the Company shall file a
Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this Agreement), the form of
Warrant and the Registration Rights Agreement) as exhibits to such filing (including all
attachments, the “8-K Filing”). From and after the issuance of the Press Release, no Buyer shall
be in possession of any material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents, that is not
disclosed in the Press Release. The Company shall not, and shall cause each of its Subsidiaries
and each of their respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Press Release without the express written consent of such Buyer. In the
event of a breach of the foregoing covenant by the Company, any Subsidiary, or its each of
respective officers, directors, employees and agents, in addition to any other remedy provided
herein or in the Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing, neither the Company nor
any Buyer shall issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and regulations, including
the applicable rules and regulations of the Principal Market (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such press release or other
public disclosure prior to its release).



(j) Additional Registration Statements. Until the date that the Registration
Statement (as defined in the Registration Rights Agreement) is first declared effective by the SEC
(the “Effective Date”), the Company will not file a registration statement under the 1933 Act
relating to securities that are not the Securities; provided, however, that the Company shall be
permitted to register on the Registration Statement the resale of shares of Common Stock and
warrant shares that may be issued in the future pursuant to a purchase right held by PointSource
Technologies LLC and its affiliates (“PointSource”) in an amount equal to approximately 1.66% of
the number of Common Shares and Warrant Shares sold pursuant to this Agreement.



(k) Corporate Existence. So long as any Buyer beneficially owns any Warrants, the
Company shall maintain its corporate existence and shall not sell all or substantially all of the
Company’s assets, except in the event of a merger or consolidation or sale of all or substantially
all of the Company’s assets, where the surviving or successor entity in such transaction (i)
assumes the Company’s obligations hereunder and under the agreements and instruments entered into
in connection herewith and (ii) is a publicly traded corporation whose common stock is quoted on or
listed for trading on the Principal Market, The Nasdaq National Market, the New York Stock Exchange
or the American Stock Exchange.



(l) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, from and after the Closing Date,
the number of shares of Common Stock issuable upon exercise of the Warrants being issued at the
Closing in conformity with Section 3(c).




	 	5.	 	TRANSFER RESTRICTIONS; TRANSFER AGENT INSTRUCTIONS.





(a) Transfer Restrictions. The legend set forth in Section 2(g) shall be removed and
the Company shall issue a certificate without such legend or any other legend to the holder of the
applicable Securities upon which it is stamped, if (i) such Securities are registered for resale
under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that
such sale, assignment or transfer of such Securities may be made without registration under the
applicable requirements of the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144. The
Company shall cause Company Counsel (as defined below) to issue the legal opinion included in the
Irrevocable Transfer Agent Instructions to the Company’s transfer agent on the Effective Date.
Following the Effective Date or at such earlier time as a legend is no longer required for certain
Securities, the Company will no later than three Business Days following the delivery by a Buyer to
the Company or the Company’s transfer agent of a legended certificate representing such Securities,
deliver or cause to be delivered to such Buyer a certificate representing such Securities that is
free from all restrictive and other legends. Following the Effective Date and upon the delivery to
any Buyer of any certificate representing Securities that is free from all restrictive and other
legends, such Buyer agrees that any sale of such Securities shall be made pursuant to the
Registration Statement and in accordance with the plan of distribution described therein or
pursuant to an available exemption from the registration requirements of the 1933 Act. The Company
may not make any notation on its records or give instructions to any transfer agent of the Company
that enlarge the restrictions on transfer set forth in Section 2(g). The Company will not effect
or publicly announce its intention to effect any exchange, recapitalization or other transaction
that effectively requires or rewards physical delivery of certificates evidencing the Common Stock.



(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Buyer or its respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon exercise of the Warrants in the form of Exhibit
C attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof, will be given
by the Company to its transfer agent with respect to the Securities, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents.



(c) Breach. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this Section 5, that a
Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.



(d) Additional Relief. If the Company shall fail for any reason or for no reason to
issue to such holder unlegended certificates within three (3) Business Days of receipt of documents
necessary for the removal of legend set forth above (the “Deadline Date”), then, in addition to all
other remedies available to the holder, if on or after the Trading Day (as defined in Section 4(m))
immediately following such three Business Day period, the holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder
of shares of Common Stock that the holder anticipated receiving from the Company (a “Buy-In"), then
the Company shall, within three Business Days after the holder’s request and in the holder’s
discretion, either (i) pay cash to the holder in an amount equal to the holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In Price"), at which point the Company’s obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to
the holder a certificate or certificates representing such shares of Common Stock and pay cash to
the holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the Closing Bid Price on the Deadline Date.
"Closing Bid Price” means, for any security as of any date, the last closing price for such
security on The NASDAQ Capital Market (the “Principal Market”), as reported by Bloomberg, or, if
the Principal Market begins to operate on an extended hours basis and does not designate the
closing bid price then the last bid price of such security prior to 4:00:00 p.m., New York Time, as
reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or
trading market for such security, the last closing price of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing price of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, the average of
the bid prices of any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
of such security on such date shall be the fair market value as mutually determined by the Company
and the holder. If the Company and the holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 12 of the Warrants. All
such determinations to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation period.




	 	6.	 	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.





The obligation of the Company hereunder to issue and sell the Common Shares and the related
Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:



(i) Such Buyer shall have executed each of the Transaction Documents to which it is a party
and delivered the same to the Company.



(ii) Such Buyer shall have delivered to the Company the Purchase Price (less the amounts
withheld pursuant to Section 4(g)) for the Common Shares and the related Warrants being purchased
by such Buyer and each other Buyer at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.



(iii) The representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date), and such Buyer shall
have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at
or prior to the Closing Date.




	 	7.	 	CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.





The obligation of each Buyer hereunder to purchase the Common Shares and the related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company with prior written
notice thereof:



(i) The Company shall have executed and delivered to such Buyer (i) each of the Transaction
Documents and (ii) the Common Shares (in such amounts as such Buyer shall request) and the related
Warrants (in such amounts as such Buyer shall request) being purchased by such Buyer at the Closing
pursuant to this Agreement.



(ii) Such Buyer shall have received the opinion of Procopio, Cory, Hargreaves & Savitch LLP,
the Company’s outside counsel (“Company Counsel”), dated as of the Closing Date, in substantially
the form of Exhibit D attached hereto.



(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.



(iv) The Company shall have delivered to such Buyer a certificate evidencing the incorporation
and good standing of the Company and each of its operating Subsidiaries in such corporation’s state
of incorporation issued by the Secretary of State of such state of incorporation as of a date
within 30 days of the Closing Date.



(v) The Common Stock (I) shall be listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.



(vi) The Company shall have delivered to such Buyer a certified copy of the Restated
Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within
30 days of the Closing Date.



(vii) The Company shall have delivered to such Buyer a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such Buyer,
(ii) the Restated Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit E.



(viii) The representations and warranties of the Company shall be true and correct as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have performed, satisfied
and complied in all respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form attached hereto as Exhibit
F.



(ix) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Common Shares and the Warrants.



(x) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.



8. TERMINATION. In the event that the Closing shall not have occurred with respect to
a Buyer on or before five (5) days from the date hereof due to the Company’s or such Buyer’s
failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of business on such date
without liability of any party to any other party.




	 	9.	 	MISCELLANEOUS.





(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.



(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.



(c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.



(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.



(e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by an instrument in writing
signed by the Company and the holders of Common Shares representing at least a majority of the
amount of the Common Shares, or, if prior to the Closing Date, the Buyers listed on the Schedule of
Buyers as being obligated to purchase at least a majority of the amount of the Common Shares. No
provision hereof may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Common Shares then outstanding. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered to all of the
parties to the Transaction Documents, holders of Common Shares or holders of the Warrants, as the
case may be. The Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents.



(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:



	 	 	 
	If to the Company:

	 	

	JMAR Technologies, Inc.

10905 Technology Place

San Diego, California 92127

Telephone:

Facsimile:

Attention:

	 	





(858) 946-

(858) 946-6879

Dennis Valentine, CFO






	 	 	 
	with a copy (for informational purposes only) to:

	 
	 	 
	Procopio, Cory, Hargreaves & Savitch LLP

	 
	 	 
	530 B Street

Suite 2100

San Diego, CA 92101

Telephone:

Facsimile:

Attention:

	 	





(619) 238-1900

(619) 235-0398

Joseph G. Martinez, Esq.






	 	 	 
	If to the Transfer Agent:

	 	

	 
	 	 
	Computershare Trust Company

	 
	 	 
	350 Indiana Street

Golden, CO 80401

Telephone:

Facsimile:

Attention:

	 	



(303) 262-0600

(303) 262-0603

Janine DeMark






If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,



	 	 	 
	with a copy (for informational purposes only) to:

	 
	 	 
	The Baum Law Firm

580 Second Street, Suite 102

Encinitas, CA 92024

Telephone:

Facsimile:

Attention:

	 	





(760) 230-2300

(760) 230-2305

Mark L. Baum, Esq.






or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.



(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Common Shares or the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of Common Shares
representing at least a majority of the number of the Common Shares, including by merger or
consolidation. A Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.



(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.



(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
delivery and exercise of Securities, as applicable. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.



(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.



(k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, (ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of such Buyer
or holder of the Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k) shall be the same as
those set forth in Section 6 of the Registration Rights Agreement.



(l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.



(m) Remedies. Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.



(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights



(o) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.



(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents and the
Company acknowledges that the Buyers are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.



[Signature Page Follows]




1




IN WITNESS WHEREOF, each Buyer and the Company have caused its respective signature
page to this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	COMPANY:

	 

	JMAR TECHNOLOGIES, INC.

By: /s/ Ronald A. Walrod

	 

	Name: Ronald A. Walrod

Title: Chief Executive Officer

	 







2




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	NITE CAPITAL LP

By: /s/ John Prinz

	 

	Name: John Prinz Title: Manager of the General Partner

	 







3




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	CRANSHIRE CAPITAL, L.P.

By: /s/ Lawrence A. Prosser

	 

	Name: Lawrence A. Prosser Title: CFO of Downsview Capital, Inc., the General

Partner

	 







4




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	WHALEHAVEN CAPITAL FUND LIMITED

By: /s/ Evan Schemenauer

	 

	Name: Evan Schemenauer Title: Director

	 







5




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	IROQUOIS MASTER FUND LTD.

By: /s/ Josh Silverman

	 

	Name: Josh Silverman Title: Authorized Signatory

	 







6




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	HUDSON BAY FUND, L.P.

By: /s/ Yoav Roth

	 

	Name: Yoav Roth Title: Portfolio Manager

	 







7




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	JEFFREY BENTON

By: /s/ Jeffrey Benton

	 

	Name: Jeffrey Benton Title: Individual

	 







8




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	CAPITAL VENTURES INTERNATIONAL

By: /s/ Todd Silverberg

	 

	Name: Todd Silverberg Title: Secretary, Heights Capital Management, Inc., its

authorized agent

	 







9




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	DOUBLE U MASTER FUND LP

By: /s/ Jonno Elliott

	 

	Name: Jonno Elliott Title: Director, Navigator Management Ltd.

	 







10




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	MONARCH CAPITAL FUND LTD.

By: /s/ Jonno Elliott

	 

	Name: Jonno Elliott Title: Director, Navigator Management Ltd.

	 







11




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	RONALD A. DURANDO

By: /s/ Ronald A. Durando

	 

	Name: Ronald A. Durando Title: Individual

	 







12




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	GUSTAVE T. DOTOLI

By: /s/ Gustave T. Dotoli

	 

	Name: Gustave T. Dotoli Title: Individual

	 







13




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	CGA RESOURCES, LLC

By: /s/ Cass Adelman

	 

	Name: Cass Adelman Title: Sole Member

	 







14




IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.



	 
	 

	BUYERS:

	 

	SMITHFIELD FIDUCIARY LLC

By: /s/ Adam J. Chill

	 

	Name: Adam J. Chill Title: Authorized Signatory

	 







15




SCHEDULE OF BUYERS




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)	 	(4)	 	(5)
	 	 	 	 	 	 	Number of Common	 	Number of Warrant	 	 
	Buyer	 	Address	 	Shares	 	Shares	 	Purchase Price
	 
	 	100 East Cook, Suite 201	 	 	 	 	 	 	 	 	 	 	 	 
	Nite Capital LP
	 	Libertyville, IL 60048
	 		250,000		 		175,000		 	$	300,000	
	Cranshire Capital,
	 	    666 Dundee Road, Suite 1901	 	 	 	 	 	 	 	 	 	 	 	 
	L.P.
	 	Northbrook, IL 60062
	 		250,000		 		175,000		 	$	300,000	
	 
	 	    320 Bay Street, Suite 1300	 	 	 	 	 	 	 	 	 	 	 	 
	Whalehaven Capital
	 	Toronto Ontario M5H 4A6
	 	 	 	 	 	 	 	 	 	 	 	 
	Fund Limited
	 	Canada
	 		833,333		 		583,333		 	$	1,000,000	
	 
	 	      641 Lexington Ave., 16th  Fl.	 	 	 	 	 	 	 	 	 	 	 	 
	Iroquois Master
	 	New York, NY 10022
	 	 	 	 	 	 	 	 	 	 	 	 
	Fund Ltd.
	 	120 Broadway, 40th Floor	 	 	 	 	 	 	 	 	 	 	 	 
	Hudson Bay Fund,
	 	New York, NY 10271
	 		208,333		 		145,833		 	$	250,000	
	L.P.
	 	47 Summit Avenue	 		187,500		 		131,250		 	$	225,000	
	Jeffrey Benton
	 	Summit, NJ  07901
	 		41,667		 		29,167		 	$	50,000	
	 
	 	101 California Street,	 	 	 	 	 	 	 	 	 	 	 	 
	Capital Ventures
	 	Suite 3250
	 	 	 	 	 	 	 	 	 	 	 	 
	International
	 	San Francisco, CA 94111
	 		250,000		 		175,000		 	$	300,000	
	Double U Master
	 	Harbour House,
	 	 	 	 	 	 	 	 	 	 	 	 
	Fund LP
	 	Waterfront Drive
	 	 	166,667	 	 	 	116,667	 	 	$	200,000	 






P.O. Box 972, Road Town,



 Tortola



 British Virgin Islands



Monarch Capital P.O. Box 972, Road Town, 166,667 116,667
$200,000


Fund, Ltd. Tortola, Harbour House, 2nd Fl.



 Waterfront Drive,



British Virgin Islands



Ronald A Durando 43 Alexander Avenue 100,000 70,000
$120,000



Nutley, NJ 07110



Gustave T. Dotoli 245 Rutgers Place 50,000 35,000
$60,000



Nutley, NJ 07110



CGA Resources, Burnham Hill Partners, 41,667 29,167
$50,000



LLC 570 Lexington Avenue



New York, NY 10022



Smithfield Fiduciary 9 West 57th Street, 27th Floor 166,667
116,667 $200,000


LLC New York, NY 10019



16




EXHIBITS




	 	 	 
	Exhibit A

Exhibit B

Exhibit C

Exhibit D

Exhibit E

Exhibit F

	 	Form of Warrants

Form of Registration Rights Agreement

Form of Irrevocable Transfer Agent Instructions

Form of Company Counsel Opinion

Form of Secretary’s Certificate

Form of Officer’s Certificate
	 
	 	 






17




SCHEDULES




Schedule 3(k) — Absence of Certain Changes


Schedule 3(m) — Conduct of Business; Regulatory Permits


Schedule 3(q) — Equity Capitalization


Schedule 3(r) — Indebtedness and Other Contracts



18



Schedule 3(k) — Absence of Certain Changes





	 	•	 	As reported in the Company’s Form 10-Q for the quarter ended
September 30, 2005, the Company’s operations will continue
to use cash in 2005 and 2006 for 1) product research and
development efforts; 2) corporate costs, primarily related
to the cost of being a public company; 3) preferred stock
redemptions and dividends; and 4) other working capital
needs. As also reported in that Form 10-Q, the Company has
determined that it will require additional financing to
complete or accelerate the development of some of its high
value emerging new products and for working capital
requirements and preferred stock redemptions beyond March
31, 2006.






	 	•	 	As reported in the Company’s Form 10-Q for the quarter ended
June 30, 2005, the Company will continue to experience flat
or lower revenues for 2005 compared to 2004 until sales from
its new products are realized.






	 	•	 	Since December 31, 2004, the Company has continued to pay
dividends payable under the Company’s Series E-H Convertible
Preferred Stock. Prior to the Amendments to the Series E-H
Preferred Stock (described below), since December 31, 2004
the Company paid Laurus a total of $233,333 in redemption
payments pursuant to the terms of the Series E-H Preferred
Stock.






	 	•	 	On February 1, 2005, the Company entered into a Securities
Purchase Agreement and completed the sale of $4 million of
the Company’s Common Stock and Warrants to five
institutional investors (Investors). Pursuant to the
Securities Purchase Agreement, the Company issued a total of
3,225,807 shares of Common Stock at $1.24 per share and
Warrants to purchase 1,209,679 shares of Common Stock to the
Investors. The Warrants have an exercise price of $1.73 per
share and a term of five years. Pursuant to the Securities
Purchase Agreement, the Company also granted the Investors
the right to participate in up to 30% of certain future
financings conducted by the Company for a two year period on
the same terms as are proposed for any such financings.






	 	•	 	In connection with the February 1, 2005 offering, the
Company also entered into agreements with Laurus Master Fund
Ltd. (“Laurus”) amending the Company’s Series E, F, G and H
Convertible Preferred Stock (Amendments). The Amendments
provided for 1) the deferral of approximately $3.8 million
in monthly redemption payments, as follows: a) the remaining
12 months of Series E redemption payments ($83,333 per month
plus a 2% fee) were deferred until July, 2006, and b) the
next 18 months of redemption payments due under the Series
F, G and H ($150,000 per month) were deferred and due in
full in February, 2007; 2) the grant of a right to the
Company to elect to pay the originally scheduled monthly
redemption payments with shares of the Company’s Common
Stock valued at a 15% discount to the then market price,
subject to a volume limitation; and 3) the reduction in the
conversion prices of the Series E-H Preferred Stock
(originally ranging from $2.85 to $3.47) to $2.00 per share.
The monthly redemption payments under the Series F-H
Preferred Stock will recommence in August, 2006 until
January, 2007, with the balance of approximately $4.25
million in the stated amount of the Series F-H Preferred
Stock due in February, 2007. These redemption payments will
be reduced to the extent that there are conversions of the
Preferred Stock into Common Stock. On October 20, 2005, the
Company entered into Amendments with Laurus which further
amended the Company’s Series E, F, G and H Convertible
Preferred Stock to 1) delete the provision allowing the
Company to elect to pay the originally scheduled monthly
redemption payments with shares of the Company’s Common
Stock described above and 2) delete a provision that allowed
Laurus to convert the Series E, F, G and H Convertible
Preferred Stock at a 20% discount to the then market price
upon default of the Series E, F, G and H Convertible
Preferred Stock.






	 	•	 	On January 26, 2005 the Company and PointSource
Technologies, LLC (PST) entered into a License Agreement
granting JMAR an exclusive license covering all PST patents
and other intellectual property related to the manufacture
and sale of scattered-radiation based products used to
detect or classify microorganisms in water and other media
for a royalty of 2.5% of the sales from the BioSentry
products over a six year period. As consideration for the
License Agreement, the Company entered into a Securities
Purchase Agreement with PST pursuant to which the Company
issued 520,000 shares of common stock and Warrants to
purchase 333,333 shares of common stock with an exercise
price of $1.38 per share, and a term of 5 years. Pursuant to
the Securities Purchase Agreement the company also granted
PST a right to purchase up to 1.66% of the number of
securities sold by the Company in certain future
transactions on the same terms as the terms of the completed
transaction. This right continues for a period of 18 months
after the execution of the Securities Purchase Agreement.
PST subsequently assigned its shares and Warrants and this
purchase rights to its affiliates.






	 	•	 	Pursuant to its purchase right, as a result of the
completion of the $4 million offering by the Company in
February, 2005, PST’s affiliates purchased 53,548 shares of
Common Stock for $1.24 per share and Warrants to purchase
20,081 shares of Common Stock with an exercise price of
$1.73 per share for a total purchase price of $66,400.






	 	•	 	On February 21, 2005, the Company entered into a Technology
Transfer and License Agreement (the “License Agreement”)
with The LXT Group, Gregory Quist and David Drake that
terminated and replaced an earlier Asset Purchase Agreement.
The License Agreement provides for the transfer of all
rights of Quist and Drake to JMAR in certain trademarks,
designs, software, lab notebooks, drawings, notes,
algorithms, data and other documents and information related
to the CORTS (BioSentry) system produced since the parties
entered into their alliance on April 16, 2004. The License
Agreement also provides for the grant of an exclusive,
perpetual, worldwide license by Quist and Drake to JMAR to
make, use, import, sell, offer for sale, lease or otherwise
dispose of products and services under the provisional
patent application filed by Quist and Drake in January, 2004
and the utility patent application filed by Quist and Drake
in January, 2005 with the United States Patent & Trademark
Office entitled “Continuous On-Line Real-Time Surveillance
System.” The scope of the license is limited to the use of
light scattering for detection of microorganism
contamination and other particles in water. In consideration
for the transfer of the rights and license of the technology
described above, JMAR agreed to pay Quist and Drake a
royalty equal to two percent (2%) of the gross revenue of
any nature arising from the CORTS (BioSentry) system used
for the detection of microorganisms in water regardless of
the technology employed, commencing on the date JMAR
receives the first dollar of CORTS revenue (the “Revenue
Start Date”) and continuing until the seventh anniversary
thereof.






	 	•	 	In December, 2005, JMAR issued 1,041,667 shares of Common
Stock and a Warrant to purchase 375,000 shares of Common
Stock, with an exercise price of $1.50 per share and a term
of 5-1/2 years, to Laurus Master Fund, Ltd. (“Laurus”) in
exchange for the cancellation of all of the issued and
outstanding shares of Series E Convertible Preferred Stock
owned by Laurus.




19









Schedule 3(m) – Conduct of Business; Regulatory Permits




The Company received a letter (the “Nasdaq Letter”) from the Nasdaq Stock Market dated October 24,
2005 which stated that the Nasdaq Staff had determined to integrate the Company’s February 1, 2005
offering with certain amendments to the Company’s Series E-H Preferred Stock with the result that
such transactions required shareholder approval under Nasdaq Marketplace Rule 4350(i)(1)(D) (the
“Rule”). As a result of the October 20, 2005 amendments to the Series E-H Preferred Stock (to
eliminate provisions which allowed adjustments to the conversion price following the occurrence of
an event of default and which granted the Company the right to pay redemptions with shares based
upon a discount to the market price at the time of such payment), the Nasdaq Letter also concluded
that the Company had regained compliance with the Rule and that this matter was closed.



20



Schedule 3(q) — Equity Capitalization




	 	•	 	Pursuant to the Securities Purchase Agreements, dated
February 1, 2005, entered into with several investors in an
offering of shares of common stock and warrants, the Company
granted the investors the right to participate in up to 30%
of certain future financings conducted by the Company for a
two year period on the same terms as are proposed for any
such financings.






	 	•	 	Pursuant to the Securities Purchase Agreement, executed on
January 26, 2005, between the Company and PointSource
Technologies, LLC, the Company granted PointSource the right
to purchase approximately 1.66% of any future offerings of
the Company’s securities for a period of 18 months.






	 	•	 	Convertible Note, dated March 21, 2003, issued to Laurus
related to the Company’s receivables-based line of credit,
providing for borrowings of up to $3 million, as to which no
amounts are currently outstanding as of the date of this
Agreement.






	 	•	 	Pursuant to an agreement for investor relations services
with Investor Relations Group (IRG), unless said agreement
is earlier terminated the Company will issue IRG Warrants to
purchase 50,000 shares on July 1, 2006, with an exercise
price equal to an average trading price as of the date of
issuance.






	 	•	 	UCC Financing Statement covering substantially all of the
Company’s assets filed in California by Laurus to secure
payment of the Convertible Note






	 	•	 	Registration Rights Agreement with PointSource Technologies,
LLC, executed on January 26, 2005. This agreement covers
 shares purchased in the future by PST and its affiliates
pursuant to their right to purchase shares following future
offerings (described above and in Schedule 3(k)).






	 	•	 	Registration Rights Agreements with Laurus covering the
 shares of Common Stock issuable under its outstanding Series
E, F, G and H Preferred Stock and Warrants issued in
connection with the several financing transactions completed
with Laurus (to the extent that the several currently
effective registration statements do not register sufficient
 shares of Common Stock as a result of the February 1, 2005
Amendments to the Preferred Stock).






	 	•	 	Registration Rights Agreements related to the sale of shares
of Common Stock issuable under various outstanding Warrants
as to which the resale of said shares is included in
currently effective registration statements.






	 	•	 	The outstanding Series F, G and H Convertible Preferred
Stock all contain provisions requiring the redemption of the
remaining stated amount. The Laurus Amendments executed on
February 1, 2005 operate to defer the next 18 months of
redemptions payments under the Series F, G and H to
February, 2007. (Described in more detailed in Schedule
3(k) above).






	 	•	 	The following is a list of the ownership by the Company’s
directors and executive officers of shares of Common Stock
and Common Stock Equivalents (including options and warrants
which are not yet exercisable):





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Common Stock	 	 	 	 
	 	 	Beneficially	 	Common Stock	 	 
	Director or Officer	 	Owned or of Record	 	Equivalents	 	Total
	 
	 	 	0	 	 	 	890,000	 	 	 	890,000	 
	 
	 	 	31,492	 	 	 	298,831	 	 	 	330,323	 
	 
	 	 	134,517	 	 	 	52,750	 	 	 	187,267	 
	 
	 	 	29,072	 	 	 	97,750	 	 	 	126,822	 
	 
	 	 	21,152	 	 	 	92,750	 	 	 	113,902	 
	 
	 	 	8,172	 	 	 	92,750	 	 	 	100,922	 
	 
	 	 	0	 	 	 	110,000	 	 	 	110,000	 
	 
	 	 	0	 	 	 	100,000	 	 	 	100,000	 
	 
	 	 	0	 	 	 	50,000	 	 	 	50,000	 
	 
	 	 	0	 	 	 	50,000	 	 	 	50,000	 
	 
	 	 	7,568	 	 	 	80,000	 	 	 	87,568	 
	 
	 	 	12,964	 	 	 	31,750	 	 	 	44,714	 
	 
	 	 	7,000	 	 	 	41,201	 	 	 	48,201	 
	Ronald A. Walrod, CEO
	 	 	 	 	 	 	 	 	 	 	 	 
	Dennis E. Valentine, CFO
	 	 	 	 	 	 	 	 	 	 	 	 
	Charles A. Dickinson, Director
	 	 	 	 	 	 	 	 	 	 	 	 
	Vernon H. Blackman, COB
	 	 	 	 	 	 	 	 	 	 	 	 
	Barry Ressler, Director
	 	 	 	 	 	 	 	 	 	 	 	 
	C. Neil Beer, Director
	 	 	 	 	 	 	 	 	 	 	 	 
	Scott H. Bloom, GM
	 	 	 	 	 	 	 	 	 	 	 	 
	John R. Ricardi, VP
	 	 	 	 	 	 	 	 	 	 	 	 
	David L. McCarty, VP
	 	 	 	 	 	 	 	 	 	 	 	 
	Douglas Cheng, VP
	 	 	 	 	 	 	 	 	 	 	 	 
	Robert Selzer, Div. SVP
	 	 	 	 	 	 	 	 	 	 	 	 
	Edward P. O’Sullivan II, Director
	 	 	 	 	 	 	 	 	 	 	 	 
	Larry R. Johnson, GM
	 	 	 	 	 	 	 	 	 	 	 	 
	Ulf Westblom, VP
	 	 	0	 	 	 	50,000	 	 	 	50,000	 
	J. Paul Gilman, Director
	 	 	4,873	 	 	 	10,000	 	 	 	14,873	 






21




Schedule 3(r) — Indebtedness and Other Contracts




3(r)(i) Indebtedness:




	 	•	 	The Company’s Series F-H Convertible Preferred Stock require redemption payments if not
previously converted. As amended by the amendments filed on February 1, 2005, the next 18
months of redemption payments for the Series F-H Preferred Stock have been deferred to
February, 2007. For the six months starting in August, 2006, monthly redemption payments
under the Series F-H Preferred Stock will recommence, with all amounts remaining
outstanding under the Series F-H Preferred Stock due and payable in February, 2007.






	 	•	 	As of the date of this Agreement, there is a total stated amount of $7,850,000 in
outstanding shares of Series F, G and H Convertible Preferred Stock, all of which is
subject to redemption. The Laurus Amendments entered into in February, 2005 operated to
defer the redemption payments as described in Schedule 3(k) above.






	 	•	 	Miscellaneous office equipment leases that may be considered capital leases under GAAP.






	 	•	 	Borrowings of up to $3 million from time-to-time under the Laurus Convertible Note,
secured by a blanket lien in substantially all of the Company’s assets.






	 	•	 	Letter of Credit issued in favor of the landlord under the new Rancho Bernardo facility
lease.





3(r)(ii): Material Contracts:




	 	•	 	The Company’s several Government Contracts are subject to cancellation by the government
for a variety of reasons, including the convenience of the Government and due to changes in
funding priorities. These contracts are multi-year contracts that are funded on an annual
basis in connection with the U.S. Government’s budget cycle. The Company’s research
contract with the Defense Advanced Research Projects Agency (DARPA) authorizes the Company
to continue to perform services under the contract prior to the receipt of its annual
funding. Upon receipt of the funding, then the Company is authorized to bill the customer
for payment. If the contract is cancelled or if the expected funding is reprogrammed or
otherwise reduced or cancelled, the Company would not received reimbursement for services
already performed. However, to the knowledge of the Company, no events have occurred to
suggest that such funding will not be received.






22