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                                                                    EXHIBIT 10.1



                              EMPLOYMENT AGREEMENT


        This Employment Agreement ("Agreement") is made by and between Joseph G.
Martinez ("Martinez") and JMAR Industries, Inc. ("JMAR").

        1. Title. Martinez shall be employed as Vice President/General Counsel
of JMAR and shall report directly to the Chief Executive Officer of JMAR.

        2. Salary. As compensation for employment with the Company, Martinez
will be paid $5,192.31 bi-weekly, which is equivalent to $135,000 per year.

        3. Management Incentive Bonus Program. As a corporate officer, Martinez
will participate in JMAR's Management Incentive Bonus Program which pays cash
bonuses based on the Company's consolidated annual profitability. For 1998,
Martinez will be allocated a 15% participation share in the Corporate Office
pool (the "Pool"), pro-rated based on the percentage of the year that he is
employed by JMAR. (For example, if Martinez starts work at JMAR on May 1st, his
pro-rated share of the Pool would be 2/3 x 15% or 10%).

        4. Auto Allowance. Martinez will receive $400 per month as an automobile
expense allowance.

        5. Equity Participation. On his employment start date, Martinez will be
granted 50,000 Employee Stock Options, subject to the conditions of JMAR's
Employee Stock Option Plan ("Plan"), a copy of which is attached hereto. The
principal elements of that Plan include:

        5.1 An option Exercise Price equal to the Closing price of JMAR stock as
        quoted on the NASDAQ National Market System for the five trading day
        average prior to the day that Martinez starts work.

        5.2 One third of Martinez' Options will vest (i.e., become exercisable)
        at the end of each successive twelve month period after Martinez' start
        date.

        5.3 If there is any contradiction between the summary of the elements of
        the Plan as described in this Agreement, and the Plan itself, the terms
        of the Plan shall govern and control.

        6. Office Location. The Company believes that the greater the amount of
time that Martinez is able to spend in close proximity to the corporate staff,
the greater will be his impact on JMAR's operations. Nevertheless, to
accommodate Martinez' current and future living arrangements, the Company will
make available to Martinez temporary office space at its Orange County facility
(which currently houses the Company's California ASIC operations).
Administrative staff support will be supplied by corporate office personnel
located in San Diego.

        7.     Expense Reimbursements.

        7.1 The Company will reimburse Martinez for all of the reasonable
        out-of-pocket expenses that he incurs in the performance of his
        employment with JMAR, excluding any costs associated with travel between
        his Orange County office and San Diego.

        7.2 The Company will reimburse Martinez for his professional expenses to
        support his continuing status as a fully licensed attorney-at-law,
        including Annual California State Bar dues, continuing education classes
        and other educational seminars and events that are deemed to be in the
        Company's best interests.



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        7.3 The Company will also provide Martinez with an annual budget to
        purchase necessary legal periodicals and other reference material and
        computer software and hardware to enable him to access standard
        professional information sources.

        8. Relocation Expense. The Company will reimburse Martinez for
reasonable, actual expenses involved in moving his primary residence from its
present location to a location within a reasonable daily commute from JMAR's
corporate office pursuant to its standard Relocation Policy.

        9.     Home Sale Realtor Fee Reimbursement. 

        9.1 The Company will reimburse Martinez for 50% of any Realtors fees
        incurred in connection with the sale of his current residence located in
        Torrance, California providing the escrow on such sale is closed and the
        fee is paid no later than August 31, 1998.

        9.2 If Martinez sells his current home in Torrance and re-locates his
        permanent residence to San Diego County prior to August 31, 1998, the
        Company will reimburse him for 100% of the Realtor fees incurred in
        connection with the sale of his Torrance home.

        10. Employee Benefits. Martinez will be enrolled in JMAR's employee
medical, dental and life insurance programs and will be eligible for all of the
benefits described in the employee benefit section of the enclosed "Personnel
Handbook". JMAR reserves the right to modify, supplement or rescind any of its
insurance programs and benefits at any time, in its sole discretion. He will
accrue three weeks paid vacation per year and will also be eligible to
participate in JMAR's 401(k) Plan (see the copy of the attached Plan
Description).

        11. First Year Of Employment. The following provisions shall govern the
term, duration, and termination of employment for the first year (365
consecutive days regardless of any leave of absence, vacation or sick days) of
Martinez employment:

        11.1 During the first year of employment, this Agreement shall terminate
        upon the occurrence of any of the following events: (a) the death of
        Martinez; (b) the incapacity or disability of Martinez, which renders
        him unable to perform substantially all of the services contemplated by
        this Agreement for a continuous period of sixty (60) days; or (c) the
        mutual agreement of Martinez and the Company.

        11.2 This Agreement may be terminated by the Company prior to completion
        of the first year of employment on the happening of one or more of the
        following events: (a) the commission of an act of fraud, dishonesty, or
        embezzlement by Martinez; (b) the willful neglect by Martinez in the
        performance of the services contemplated by this Agreement in such
        manner as to provide reasonable cause for terminating his services; or
        (c) the breach by Martinez of any of the covenants or obligations under
        this Agreement and such breach provides reasonable cause for the Company
        to terminate this Agreement; provided that, in order to terminate this
        Agreement pursuant to clauses (b) and (c) of this Paragraph 11.2, JMAR
        shall have given thirty (30) days written notice of termination to
        Martinez, and Martinez shall have failed to fully cure or correct such
        willful neglect or breach within the thirty days immediately following
        such notice.

        11.3 This Agreement may be terminated by Martinez prior to the first
        year on thirty (30) days written notice of termination to JMAR if JMAR
        breaches any of its covenants or obligations under the Agreement and
        such breach provides reasonable cause for Martinez to terminate this
        Agreement.

        11.4 In addition to the circumstances under which this Agreement may be
        terminated by the Company pursuant to Paragraph 11.2, the Company may
        terminate this Agreement at any time, without cause, upon thirty (30)
        days written notice of termination to Martinez; provided, however,



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        should the Company terminate this Agreement pursuant to this Paragraph
        11.4 prior to the end of the first year of employment (other than a
        termination pursuant to the provisions of Paragraph 11.2), then Martinez
        shall become entitled to receive as severance pay an amount equal to the
        balance of the compensation that would have been payable to him through
        the end of the first year of employment (subject to earlier termination
        on the happening of the event specified in Paragraph 11.2), payable at
        the rate and times as such compensation would have been payable to
        Martinez had this Agreement not been terminated pursuant to this
        Paragraph. In addition to the payment of such severance pay, all
        insurance policies in which Martinez participates shall continue through
        the end of what otherwise would have been the first year of employment.

        11.5 If employment is terminated under this Agreement for any reason by
        any party hereto, then Martinez' employment with JMAR shall terminate.

        12. Employment After The First Year. If employment continues for more
than one year, the following provisions shall govern the term, duration, and
termination of employment:

        12.1 If employment continues beyond the first year, employment will be
        at-will and may be terminated at any time, for any reason, by either
        JMAR or Martinez. If the Company decides to terminate Martinez, it or
        they will provide thirty (30) days notice and Martinez will receive an
        additional sixty (60) days severance pay, unless the termination is on
        the ground set forth in Paragraph 12.3(b) below, in which case Martinez
        will receive neither notice nor severance.

        12.2 Martinez and the Company understand and agree that Martinez and the
        Company have the right to terminate Martinez' employment at any time for
        any reason, with or without cause. Martinez and the Company understand
        and agree that nothing in the Company's employee handbooks or its other
        policies is intended to be, and nothing in them should be construed to
        be, a limitation on the right to terminate the employment relationship
        at any time for any reason.

        12.3 Notwithstanding the notice provision in Paragraph 12.1 above, this
        Agreement shall terminate immediately (without advance notice) on the
        happening of one or more of the following events: (a) the death of
        Martinez; or (b) the commission of an act of fraud, dishonesty, or
        embezzlement by Martinez.

        12.4 This Agreement contains the entire agreement between the parties as
        to the term and duration of the employment. It supersedes any and all
        other agreements, either oral or in writing between the parties hereto
        with respect to Martinez' term of employment and the termination
        thereof. Each party to this Agreement acknowledges that no
        representations, inducements, promises, or agreements, oral or
        otherwise, have been made by any party, or anyone acting on behalf of
        any party, which are not embodied herein, and acknowledges that no other
        agreement, statement, or promise not contained in this Agreement shall
        be valid or binding. This Agreement may not be modified or amended by
        oral agreement, or course of conduct, but only by an agreement in
        writing signed by both the Chairman or the CEO of JMAR and by Martinez.

        13.    Confidential Information.

        13.1 Concurrently herewith, Martinez shall enter into an Invention and
        Secrecy Agreement substantially similar to the agreement executed by the
        other key employees of JMAR. This Agreement is intended to supplement
        and not limit or restrict the provisions of such Invention and Secrecy
        Agreement. Martinez will acknowledge that, in the course of the
        performance of Martinez' services hereunder, he may become acquainted
        with confidential information regarding JMAR (and companies affiliated
        with or owned, operated, or supervised by JMAR) and their business,
        operations, finances, personnel, accounts, customers, and suppliers.
        This information may include information relating to persons, firms,
        corporations, and other entities which are or become



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        suppliers or customers of JMAR (or a company affiliated with or owned,
        operated, or supervised by JMAR). Martinez agrees he will not, either
        during the term of this Agreement or thereafter, without the prior
        express written consent of JMAR, disclose or make any use of such
        confidential information except as may be required in the course of the
        performance of Martinez' services hereunder.

        13.2 The undertakings and obligations of the parties under this
        Agreement shall not apply to any proprietary information which:

               (a) Is disclosed in a printed publication available to the
               public, is described in a patent anywhere in the world, or is
               otherwise in the public domain at the time of disclosure;

               (b) Is generally disclosed to third parties by the disclosing
               party without restriction on such third parties; or

               (c) Is approved for release by written authorization of the
               disclosing party.

        14. Protection Of Property. All records, files, manuals, list of
customers, blanks, forms, materials, furnished to Martinez by the Company (or
any company affiliated with or owned, operated, or supervised by the Company),
used on its behalf or generated or obtained during the course of the performance
of Martinez' services hereunder, shall be and remain the property of the Company
(or any company affiliated with or owned, operated, or supervised by the
Company, as the case may be). Martinez shall be a holder thereof for the sole
use and benefit of the Company (or any companies affiliated with or owned,
operated, or supervised by the Company, as the case may be) and shall safely
keep and preserve such property, except as consumed in the normal business
operations of the Company (or any company affiliated with or owned, operated, or
supervised by the Company, as the case may be). Martinez acknowledges that this
property is confidential and is not readily accessible to the competitors of the
Company. Upon termination of this Agreement hereunder, Martinez shall
immediately deliver to the Company, or its authorized representatives, all such
property, including all copies, remaining in Martinez' possession or control.

        15. Severability. If any provision in this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way.

        16. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

        17. Waiver. The failure of any party to insist on strict compliance with
any of the terms, covenants, or conditions of this Agreement by the other party
shall not be deemed a waiver of that term, covenant, or condition, nor shall any
waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.

        18. Arbitration. Except as otherwise required by law, any controversy or
claim arising out of or relating to this Agreement or the breach or termination
thereof, shall be settled by arbitration in San Diego County, California in
accordance with the rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The arbitrator(s) shall have no authority whatsoever to
make an award of punitive damages to either side. By agreeing to arbitration
under this paragraph, JMAR and Martinez understand they are agreeing to have any
dispute relating to Martinez' employment decided by a neutral arbitrator and as
to those disputes decided by the neutral arbitrator, JMAR and Martinez are
giving up their right to a jury or court trial and giving up their right, if
any, to seek punitive damages against each other.



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        19. Effective Date. This Agreement shall become effective on the date
Martinez begins employment with JMAR.




Date:   4/15/98                             /s/ John S. Martinez         
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                                            John S. Martinez
                                            Chairman of the Board
                                            JMAR

Date:  4/13/98                              /s/ Barry Ressler           
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                                            Barry Ressler

Date:  4/13/98                              /s/ C. Neil Beer
     -----------------                      ------------------------------------
                                            Dr. C. Neil Beer

Date:  4/15/98                              /s/ Vernon H. Blackman
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                                            Dr. Vernon H. Blackman

Date:  4/15/98                              /s/ James H. Banister, Jr.  
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                                            James H. Banister, Jr.

Date:  April 16, 1998        Agreed To:     /s/ Joseph G. Martinez
     -----------------                      ------------------------------------
                                            Joseph G. Martinez



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