EX-10.3






Exhibit 10.3




FORM OF WARRANT




NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (II) AN OPINION OF COUNSEL, IN A FORM
REASONABLE ACCEPTABLE TO THE COMPANY, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION OR
QUALIFICATION UNDER SAID ACT OR (III) SUCH TRANSFER BEING MADE 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.



JMAR TECHNOLOGIES, INC.




WARRANT




	 	 	 	 	 
	Warrant No.: __________
Number of Shares:
	 		—	
	 
	 	 	 	 







Date of Issuance: February 1, 2005 (“Issuance Date”)



JMAR Technologies, Inc., a Delaware corporation (the “Company”), hereby certifies that, for value
received, the receipt and sufficiency of which are hereby acknowledged, [PORTSIDE GROWTH &
OPPORTUNITY FUND], the registered holder hereof or its permitted assigns (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price
(as defined below) then in effect, at any time or times on or after the date hereof, but not after
11:59 p.m., New York Time, on the Expiration Date (as defined below), [     ]
(     )1 fully paid nonassessable shares of Common Stock (as defined
below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 15. This Warrant (including all Warrants
issued in exchange, transfer or replacement hereof, the “Warrants”) is one of the Warrants (the
"SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated
as of February 1, 2005 (the “Subscription Date"), among the Company and the investors (the
"Buyers”) referred to therein (the “Securities Purchase Agreement”).




1. EXERCISE OF WARRANT.



(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of immediately
available funds or (B) by notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase
the remaining number of Warrant Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (or
notice of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business
Day following the date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate, registered in
the Company’s share register in the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to in clause (ii)(A) above or notification to
the Company of a Cashless Exercise referred to in Section 1(d), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the certificates
evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise
pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no event later than three Business
Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section
7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior
to such exercise under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of
this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to
the nearest whole number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.



(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means
$     2, subject to adjustment as provided herein.



(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail for any
reason or for no reason to issue to the Holder within three (3) Business Days of receipt of the
Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the Company’s share register or to
credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder’s exercise of this Warrant, then, in addition to all other
remedies available to the Holder, the Company shall pay in cash to the Holder on each day after
such third Business Day that the issuance of such shares of Common Stock is not timely effected an
amount equal to 1.5% of the product of (A) the sum of the number of shares of Common Stock not
issued to the Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale
Price of the shares of Common Stock on the trading day immediately preceding the last possible date
which the Company could have issued such shares of Common Stock to the Holder without violating
Section 1(a). In addition to the foregoing, if within three (3) trading days after the Company’s
receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the Company’s share register
or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon such holder’s exercise hereunder, and if on or after such Trading Day
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 issuable upon such exercise 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 date of exercise.



(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary, if
a Registration Statement (as defined in the Registration Rights Agreement) covering the Warrant
Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not
available for the resale of such Unavailable Warrant Shares after the Effectiveness Deadline (as
defined in the Registration Rights Agreement), the Holder may, in its sole discretion, exercise
this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to
be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead
to receive upon such exercise the “Net Number” of shares of Common Stock determined according to
the following formula (a “Cashless Exercise”):




Net Number = (A x B) — (A x C)

B



For purposes of the foregoing formula:




A = the total number of shares with respect to which this Warrant is then being
exercised.




B = the Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
on the date immediately preceding the date of the Exercise Notice.




C= the Exercise Price then in effect for the applicable Warrant Shares at the time
of such exercise.



(e) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 12.




(f) Limitations on Exercises.




(i) Beneficial Ownership. The Company shall not effect the exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent
that after giving effect to such exercise, such Person (together with such Person’s
affiliates) would beneficially own in excess of 4.99% of the shares of Common Stock
outstanding immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such sentence is being made, but
shall exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Person and its affiliates
(including, without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K,
Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. For any reason at any time, upon the written
or oral request of the Holder, the Company shall within one Business Day confirm orally and
in writing to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including the SPA
Warrants, by the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.




(ii) Principal Market Regulation. The Company shall not be obligated to issue
any shares of Common Stock upon exercise of this Warrant if the issuance of such shares of
Common Stock would exceed that number of shares of Common Stock which the Company may issue
upon exercise of this Warrant without breaching the Company’s obligations under the rules or
regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall
not apply in the event that the Company (A) obtains the approval of its shareholders as
required by the applicable rules of the Principal Market for issuances of shares of Common
Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably satisfactory
to the Required Holders. Until such approval or written opinion is obtained, no Buyer shall
be issued, upon exercise of any SPA Warrants, shares of Common Stock in an amount greater
than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the
total number of shares of Common Stock issued to such Buyer pursuant to the Securities
Purchase Agreement on the Issuance Date and the denominator of which is the aggregate number
of shares of Common Stock issued to the Buyers pursuant to the Securities Purchase Agreement
on the Issuance Date (with respect to each Buyer, the “Exchange Cap Allocation”). In the
event that any Buyer shall sell or otherwise transfer any of such Buyer’s SPA Warrants, the
transferee shall be allocated a pro rata portion of such Buyer’s Exchange Cap Allocation,
and the restrictions of the prior sentence shall apply to such transferee with respect to
the portion of the Exchange Cap Allocation allocated to such transferee. In the event that
any holder of SPA Warrants shall exercise all of such holder’s SPA Warrants into a number of
 shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation and the number
of shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on a pro rata
basis in proportion to the shares of Common Stock underlying the SPA Warrants then held by
each such holder. In the event that the Company is prohibited from issuing any Warrant
Shares for which an Exercise Notice has been received as a result of the operation of this
Section 1(f)(ii), the Company shall pay cash in exchange for cancellation of such Warrant
Shares, at a price per Warrant Share equal to the difference between the Closing Sale Price
and the Exercise Price as of the date of the attempted exercise.




2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.



Adjustment upon Subdivision or Combination of Common Stock. If the Company at any
time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Warrant Shares will be proportionately increased. If
the Company at any time after the date of issuance of this Warrant combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares will be proportionately
decreased. Any adjustment under this Section 2(b) shall become effective at the close of business
on the date the subdivision or combination becomes effective.




3. RIGHTS UPON DISTRIBUTION OF ASSETS.



If the Company shall declare or make any dividend or other distribution of its assets (or
rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such
case:



(a) any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Stock on the trading day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to
one share of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the Common
Stock on the trading day immediately preceding such record date; and



(b) the number of Warrant Shares shall be increased to a number of shares equal to the number
of shares of Common Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a);
provided that in the event that the Distribution is of common stock (“Other Common Stock”) of a
company whose common stock is traded on a national securities exchange or a national automated
quotation system, then the holder of this Warrant may elect to receive a warrant to purchase Other
Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the number
of shares of Other Common Stock that would have been payable to the holder of this Warrant pursuant
to the Distribution had the holder exercised this Warrant immediately prior to such record date and
with an aggregate exercise price equal to the product of the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding paragraph (a) and the number of Warrant Shares calculated in accordance with
the first part of this paragraph (b).




4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.



(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.



(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the
provisions of this Section (4)(b) pursuant to written agreements in form and substance satisfactory
to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant, including, without limitation, an adjusted exercise price equal to the
value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and
exercisable for a corresponding number of shares of capital stock equivalent to the shares of
Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and
satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible
Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to,
and be substituted for (so that from and after the date of such Fundamental Transaction, the
provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall assume all of the obligations of
the Company under this Warrant with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall
deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or subscription rights) which
the Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash,
assets or other property) purchasable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder would have been
entitled to receive upon the happening of such Fundamental Transaction had the Warrant been
exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.




5. NONCIRCUMVENTION. 



The Company hereby covenants and agrees that the Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and will at all times in
good faith carry out all the provisions of this Warrant and take all action as may be required to
protect the rights of the holder of this Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the Exercise Price then in effect, (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii)
will, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and
keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting
the exercise of the SPA Warrants, 100% of the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to
any limitations on exercise).




6. HOLDER NOT DEEMED A STOCKHOLDER. 



Except as otherwise specifically provided herein, no holder, solely in such Person’s capacity
as a holder, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder
of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed
to confer upon the holder hereof, solely in such Person’s capacity as a holder of this Warrant, any
of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or
subscription rights, or otherwise, prior to the issuance to the holder of this Warrant of the
Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.
In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on
such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of
the Company. Notwithstanding this Section 6, the Company will provide the holder of this Warrant
with copies of the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders, except for those notices
and other information contained within the SEC Documents and available on the SEC’s EDGAR system.




7. REISSUANCE OF WARRANTS.



(a) Transfer of Warrant. If this Warrant is to be transferred, the holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the holder of this Warrant a new Warrant (in accordance with Section 7(d)), registered
as the holder of this Warrant may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of Warrant Shares then
underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to
the holder of this Warrant representing the right to purchase the number of Warrant Shares not
being transferred.



(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
holder of this Warrant to the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a
new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.



(c) Warrant Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is designated by the holder of this
Warrant at the time of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.



(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the holder of this
Warrant which, when added to the number of shares of Common Stock underlying the other new Warrants
issued in connection with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new
Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions
as this Warrant.




8. NOTICES. 



Whenever notice is required to be given under this Warrant, unless otherwise provided herein,
such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement.
The Company shall provide the holder of this Warrant with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company will give written
notice to the holder of this Warrant (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least fifteen days prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock or (B) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in conjunction with such notice
being provided to such holder.




9. AMENDMENT AND WAIVER. 



Except as otherwise provided herein, the provisions of this Warrant may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the holders of SPA
Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of
the SPA Warrants then outstanding; provided that no such action may increase the exercise price of
any SPA Warrant or decrease the number of shares or class of stock obtainable upon exercise of any
SPA Warrant without the written consent of the holder of this Warrant. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the SPA Warrants then
outstanding.




10. GOVERNING LAW. 



This Warrant shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Warrant 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.




11. CONSTRUCTION; HEADINGS. 



This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers and shall
not be construed against any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.




12. DISPUTE RESOLUTION. 



In the case of a dispute as to the determination of the Exercise Price or the arithmetic
calculation of the Warrant Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two Business Days of receipt of the Exercise Notice
giving rise to such dispute, as the case may be, to the holder of this Warrant. If the holder of
this Warrant and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two Business
Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the holder of this Warrant or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside
accountant. The Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the Company and the Holder of
the results no later than ten Business Days from the time it receives the disputed determinations
or calculations. Such investment bank’s or accountant’s determination or calculation, as the case
may be, shall be binding upon all parties absent demonstrable error.




13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. 



The remedies provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant, the Securities Purchase Agreement and the Registration
Rights Agreement, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the holder of this Warrant to
pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the holder of this Warrant and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the holder
of this Warrant shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and without any bond or
other security being required.




14. TRANSFER.



This Warrant may be offered for sale, sold, transferred or assigned without the consent of the
Company, except as may otherwise be required by Section 2(f) of the Securities Purchase Agreement.




15. CERTAIN DEFINITIONS. 




For purposes of this Warrant, the following terms shall have the following meanings:




(a) “Bloomberg” means Bloomberg Financial Markets.



(b) "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.



(c) "Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on 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 or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, 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 bid price or
last trade price, respectively, 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 bid price or last trade price, respectively, 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 or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, 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 or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, 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. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.



(d) "Common Stock” means (i) the Company’s common stock, par value $0.01 per share, and (ii)
any capital stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.



(e) "Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.



(f) "Eligible Market” means means The New York Stock Exchange, Inc., the American Stock
Exchange, the Nasdaq National Market or the Principal Market.




(g) “Expiration Date” means February 1, 2010.



(h) "Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company to another Person, or (iii)
allow another Person to make a purchase, tender or exchange offer that is accepted by the holders
of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its Common Stock.



(i) "Options” means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.



(j) "Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.



(k) "Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.




(l) “Principal Market” means The NASDAQ SmallCap Market.



(m) "Registration Rights Agreement” means that certain registration rights agreement dated the
Subscription Date by and among the Company and the Buyers.



(n) "Required Holders” means the holders of the SPA Warrants representing at least a majority
of shares of Common Stock underlying the SPA Warrants then outstanding.



(o) "Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent
Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.



[Signature Page Follows]




1




IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the
Issuance Date set out above.




JMAR TECHNOLOGIES, INC.




By:




Name:


Title:




1 INSERT NUMBER OF WARRANT SHARES EQUAL TO
37.5% OF THE NUMBER OF COMMON SHARES PURCHASED.




2INSERT AMOUNT EQUAL TO 115% OF THE NUMERICAL
AVERAGE OF THE CLOSING PRICE FOR EACH OF THE 10 DAYS PRIOR TO THE CLOSING.



2



EXHIBIT A




EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT




JMAR TECHNOLOGIES, INC.




To: JMAR Technologies, Inc.



The undersigned is the holder of Warrant No.      (the “Warrant”) issued by JMAR
Technologies, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.




1. The Warrant is currently exercisable to purchase a total of      Warrant Shares.



2. The undersigned holder hereby exercises its right to purchase      Warrant Shares
pursuant to the Warrant.




3. The Holder intends that payment of the Exercise Price shall be made as:



	 	 	 
	     

	 	a “Cash Exercise” with respect to      Warrant Shares; and/or
	
 
	 	 
	     

	 	a “Cashless Exercise” with respect to      Warrant Shares.
	
 
	 	 







4. Pursuant to this exercise, the Company shall deliver to the holder      Warrant
Shares in accordance with the terms of the Warrant.



5. Following this exercise, the Warrant shall be exercisable to purchase a total of
     Warrant Shares.




Please issue the Warrant Shares in the following name and to the following address:




Issue to:




Account Number:




(if electronic book entry transfer)




DTC Participant Number:




(if electronic book entry transfer)



Date:      ,      



Name of Registered Holder



By:




Name:



Title:



3



ACKNOWLEDGMENT




The Company hereby acknowledges this Exercise Notice and hereby directs Computershare Trust
Company to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated February 1, 2005 from the Company and acknowledged and agreed to
by Computershare Trust Company.




JMAR TECHNOLOGIES, INC.




By:




Name:


Title:



4




FORM OF ASSIGNMENT





[To be completed and signed only upon transfer of Warrant]



FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
     the right represented by the within Warrant to purchase
     shares of Common Stock of JMAR Technologies, Inc. to which the within Warrant relates
and appoints      attorney to transfer said right on the books of JMAR Technologies,
Inc. with full power of substitution in the premises.



	 	 	 
	Dated: ,

	 	

	 
	 	 
	
 
	 	(Signature must conform in all respects to name

of holder as specified on the face of the

Warrant)
	 
	 	 
	
 
	 	Address of Transferee
	 
	 	 
	 
	 	 
	 
	 	 
	In the presence of:

	 	

	 
	 	 








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