Document:

jmar_10q-ex1008.htm

    EXHIBIT
      10.8

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
      August 31, 2007, by and between JMAR TECHNOLOGIES, a Delaware corporation (the
      “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands company (the
“Purchaser”).

     

    RECITALS

     

    WHEREAS,
      the Company has authorized the sale to the Purchaser of a Secured Term Note
      in
      the aggregate principal amount of Seven Million Five Hundred Thousand Dollars
      ($7,500,000) in the form of Exhibit A hereto (as amended, modified and/or
      supplemented from time to time, the “Note”);

     

    WHEREAS,
      the Company wishes to issue to the Purchaser (i) a warrant in the form of
      Exhibit B hereto (as amended, modified and/or supplemented from time to time,
      the “Warrant A”) to purchase up to 80,000,000 shares of the Company’s Common
      Stock (subject to adjustment as set forth therein)  and (ii) a warrant
      in the form of Exhibit B hereto (as amended, modified and/or supplemented from
      time to time, the “Warrant B”) to purchase up to 39,000,000 shares of the
      Company’s Common Stock (subject to adjustment as set forth therein) (Warrant A
      and Warrant B are collectively referred to herein as the “Warrants”) in
      connection with the Purchaser’s purchase of the Note;

     

    WHEREAS,
      the Purchaser desires to purchase the Note, and the Warrants on the terms and
      conditions set forth herein; and

     

    WHEREAS,
      the Company desires to issue and sell the Note and Warrants to the Purchaser
      on
      the terms and conditions set forth herein.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the foregoing recitals and the mutual promises,
      representations, warranties and covenants hereinafter set forth and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree as follows:

     

    1.           Agreement
      to Sell and Purchase.  Pursuant to the terms and conditions set
      forth in this Agreement, on the Closing Date (as defined in Section 3), the
      Company shall sell to the Purchaser, and the Purchaser shall purchase from
      the
      Company, the Note.  The sale of the Note on the Closing Date shall be
      known as the “Offering.”  The Note will mature on the Maturity Date
      (as defined in the Note).  Collectively, the Note and Warrants and
      Common Stock issuable upon exercise of the Warrants are referred to as the
      “Securities.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.           Fees
      and Warrant.  On the Closing Date:

     

    (a)           The
      Company will issue and deliver to the Purchaser Warrant A and Warrant B in
      connection with the Offering, pursuant to Section 1 hereof.  All the
      representations, covenants, warranties, undertakings, and indemnification,
      and
      other rights made or granted to or for the benefit of the Purchaser by the
      Company are hereby also made and granted for the benefit of the holder of the
      Warrants and shares of the Company’s Common Stock issuable upon exercise of the
      Warrants (the “Warrant Shares”).

     

    (b)           The
      Company shall pay to Laurus Capital Management, LLC, the investment manager
      of
      the Purchaser (“LCM”), a non-refundable payment in an amount equal to
      $262,500.  The foregoing payment is referred to herein as the “LCM
      Payment.”  Such payment shall be deemed fully earned on the Closing
      Date and shall not be subject to rebate or proration for any
      reason.

     

    3.           Closing,
      Delivery and Payment.

     

    3.1           Closing.  Subject
      to the terms and conditions herein, the closing of the transactions contemplated
      hereby (the “Closing”), shall take place on the date hereof, at such time or
      place as the Company and the Purchaser may mutually agree (such date is
      hereinafter referred to as the “Closing Date”).

     

    3.2           Delivery.  Pursuant
      to the Escrow Agreement, at the Closing on the Closing Date, the Company will
      deliver to the Purchaser, among other things, the Note and the Warrants and
      the
      Purchaser will deliver to the Company, among other things, the amounts set
      forth
      in the Disbursement Letter by certified funds or wire transfer (it being
      understood that $6,420,600.61 of the proceeds of the Note shall be placed in
      the
      Restricted Account (as defined in the Restricted Account Agreement referred
      to
      below)) and that $194,899.39 of the proceeds of the Note shall be paid to the
      Purchaser from the Restricted Account at closing in respect of outstanding
      Obligations (as defined in the Security Agreement referred to in the
      Reaffirmation and Ratification Agreement of even date herewith). The Company
      hereby acknowledges and agrees that Purchaser’s obligation to purchase the Note
      from the Company on the Closing Date shall be contingent upon the satisfaction
      (or waiver by the Purchaser in its sole discretion) of the
      items and matters set forth in the closing checklist
      provided by the Purchaser to the Company on or prior to the Closing
      Date.

     

    4.           Representations
      and Warranties of the Company.  The Company hereby represents and
      warrants to the Purchaser as follows

     

    
      
        
        

      

      
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    4.1           Organization,
      Good Standing and Qualification.  Each of the Company and each of
      its Subsidiaries is a corporation, partnership or limited liability company,
      as
      the case may be, duly organized, validly existing and in good standing under
      the
      laws of its jurisdiction of organization.  Each of the Company and
      each of its Subsidiaries has the corporate, limited liability company or
      partnership, as the case may be, power and authority to own and operate its
      properties and assets and, insofar as it is or shall be a party thereto, to
      (1)
      execute and deliver (i) this Agreement, (ii) the Note and the Warrants to
      be issued in connection with this Agreement, (iii) the Reaffirmation and
      Ratification Agreement dated as of the date hereof between the Company, certain
      Subsidiaries of the Company and the Purchaser (as amended, modified and/or
      supplemented from time to time, the “Reaffirmation Agreement”),
      (iv)  the Funds Escrow Agreement dated as of the date hereof among the
      Company, the Purchaser and the escrow agent referred to therein, substantially
      in the form of Exhibit C hereto (as amended, modified and/or supplemented from
      time to time, the “Escrow Agreement”), (v) the Restricted Account Agreement
      dated as of the date hereof among the Company, the Purchaser and North Fork
      Bank
      (as amended, modified or supplemented from time to time, the “Restricted Account
      Agreement”), (vi) the Restricted Account Side Letter related to the Restricted
      Account Agreement dated as of the date hereof between the Company and the
      Purchaser (as amended, modified or supplemented from time to time, the
“Restricted Account Side Letter”) and (vii) all other documents, instruments and
      agreements entered into in connection with the transactions contemplated hereby
      and thereby (the preceding clauses (ii) through (vii), collectively, the
“Related Agreements”); (2) issue and sell the Note; (3) issue and sell the
      Warrants and the Warrant Shares; and (4) carry out the provisions of this
      Agreement and the Related Agreements and to carry on its business as presently
      conducted.  Each of the Company and each of its Subsidiaries is duly
      qualified and is authorized to do business and is in good standing as a foreign
      corporation, partnership or limited liability company, as the case may be,
      in
      all jurisdictions in which the nature or location of its activities and of
      its
      properties (both owned and leased) makes such qualification necessary, except
      for those jurisdictions in which failure to do so has not, or could not
      reasonably be expected to have, individually or in the aggregate, a material
      adverse effect on the business, assets, liabilities, condition (financial or
      otherwise), properties, operations or prospects of the Company and its
      Subsidiaries, taken individually and as a whole (a “Material Adverse
      Effect”).

     

    4.2           Subsidiaries.  Each
      direct and indirect Subsidiary of the Company, the direct owner of such
      Subsidiary and its percentage ownership thereof, is set forth on Schedule
      4.2.  For the purpose of this Agreement, a “Subsidiary” of any person
      or entity means (i) a corporation or other entity whose shares of stock or
      other
      ownership interests having ordinary voting power (other than stock or other
      ownership interests having such power only by reason of the happening of a
      contingency) to elect a majority of the directors of such corporation, or other
      persons or entities performing similar functions for such person or entity,
      are
      owned, directly or indirectly, by such person or entity or (ii) a corporation
      or
      other entity in which such person or entity owns, directly or indirectly, more
      than 50% of the equity interests at such time.  For purposes of this
      Agreement and the Related Agreements, the term “Subsidiary” shall not include
      JSI Microelectronics, Inc.

     

    4.3           Capitalization;
      Voting Rights.

     

    (a)           
      The authorized capital stock of the Company, as of the date hereof consists
      of
      85,000,000 shares, of which 80,000,000 are shares of Common Stock, par value
      $0.01 per share, 47,594,823 shares of which are issued and outstanding, and
      5,000,000 are shares of preferred stock, par value $0.01 per share of
      which  11,778 shares of Series G preferred stock ($10 stated value),
      579,765 shares of Series I preferred stock ($10 stated value) and 708.8 shares
      of Series J preferred stock ($1000 stated value) are issued and
      outstanding.  The authorized, issued and outstanding capital stock of
      each Subsidiary of the Company is set forth on Schedule 4.3.

     

    
      
        
        

      

      
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    (b)           Except
      as disclosed on Schedule 4.3, other than:  (i) the shares reserved for
      issuance under the Company’s stock option plans; and (ii) shares which may be
      granted pursuant to this Agreement and the Related Agreements, there are no
      outstanding options, warrants, rights (including conversion or preemptive rights
      and rights of first refusal), proxy or stockholder agreements, or arrangements
      or agreements of any kind for the purchase or acquisition from the Company
      of
      any of its securities.  Except as disclosed on Schedule 4.3, neither
      the offer, issuance or sale of any of the Note or the Warrants, or the issuance
      of any of the Warrant Shares, nor the consummation of any transaction
      contemplated hereby will result in a change in the price or number of any
      securities of the Company outstanding, under anti-dilution or other similar
      provisions contained in or affecting any such securities.

     

    (c)           All
      issued and outstanding shares of the Company’s Common
      Stock:  (i) have been duly authorized and validly issued and are
      fully paid and nonassessable; and (ii) were issued in compliance with all
      applicable state and federal laws concerning the issuance of
      securities.

     

    (d)           The
      rights, preferences, privileges and restrictions of the shares of the Common
      Stock are as stated in the Company’s Certificate of Incorporation (the
“Charter”).  Except as to the portion of the Warrant Shares that are
      in excess of the Company’s total authorized shares of Common Stock, the Warrant
      Shares have been duly and validly reserved for issuance.  When issued
      in compliance with the provisions of this Agreement and the Company’s Charter,
      the Securities will be validly issued, fully paid and nonassessable, and will
      be
      free of any liens or encumbrances; provided, however, that the Securities may
      be
      subject to restrictions on transfer under state and/or federal securities laws
      as set forth herein or as otherwise required by such laws at the time a transfer
      is proposed.

     

    4.4           Authorization;
      Binding Obligations.  All corporate, partnership or limited
      liability company, as the case may be, action on the part of the Company and
      each of its Subsidiaries (including their respective officers and directors)
      necessary for the authorization of this Agreement and the Related Agreements,
      the performance of all obligations of the Company and its Subsidiaries hereunder
      and under the other Related Agreements at the Closing and, the authorization,
      sale, issuance and delivery of the Note and Warrant has been taken or will
      be
      taken prior to the Closing; subject, however, if required, to the requirement
      to
      obtain approval of the Company’s shareholder to an increase in the authorized
      number of shares of Common Stock necessary for the full exercise of the
      Warrants.  This Agreement and the Related Agreements, when executed
      and delivered and to the extent it is a party thereto, will be valid and binding
      obligations of each of the Company and each of its Subsidiaries, enforceable
      against each such person or entity in accordance with their terms,
      except:

     

    
      
        
        

      

      
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    (a)           as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b)           general
      principles of equity that restrict the availability of equitable or legal
      remedies.

     

    The
      sale
      of the Note is not and will not be subject to any preemptive rights or rights
      of
      first refusal that have not been properly waived or complied
      with.  The issuance of the Warrants and the subsequent exercise of the
      Warrants for Warrant Shares are not and will not be subject to any preemptive
      rights or rights of first refusal that have not been properly waived or complied
      with.

     

    4.5           Liabilities.  Neither
      the Company nor any of its Subsidiaries has any liabilities, except current
      liabilities incurred in the ordinary course of business and liabilities
      disclosed in any of the Company’s filings under the Securities Exchange Act of
      1934 (“Exchange Act”) made prior to the date of this Agreement (collectively,
      the “Exchange Act Filings”), copies of which have been provided to the
      Purchaser.

     

    4.6           Agreements;
      Action.  Except as set forth on Schedule 4.6 or as disclosed in
      any Exchange Act Filings:

     

    (a)           there
      are no agreements, understandings, instruments, contracts, proposed
      transactions, judgments, orders, writs or decrees to which the Company or any
      of
      its Subsidiaries is a party or by which it is bound which may involve: (i)
      obligations (contingent or otherwise) of, or payments to, the Company or any
      of
      its Subsidiaries in excess of $50,000 (other than obligations of, or payments
      to, the Company or any of its Subsidiaries arising from purchase or sale
      agreements entered into in the ordinary course of business); or (ii) the
      transfer or license of any patent, copyright, trade secret or other proprietary
      right to or from the Company or any of its Subsidiaries (other than licenses
      arising from the purchase of “off the shelf” or other standard products); or
      (iii) provisions restricting the development, manufacture or distribution of
      the
      Company’s or any of its Subsidiaries products or services; or (iv)
      indemnification by the Company or any of its Subsidiaries with respect to
      infringements of proprietary rights.

     

    (b)           Since  June
      30, 2007 (the “Balance Sheet Date”), neither the Company nor any of its
      Subsidiaries has:  (i) declared or paid any dividends, or authorized
      or made any distribution upon or with respect to any class or series of its
      capital stock; (ii) incurred any indebtedness for money borrowed or any other
      liabilities (other than ordinary course obligations) individually in excess
      of
      $50,000 or, in the case of indebtedness and/or liabilities individually less
      than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans
      or
      advances to any person or entity not in excess, individually or in the
      aggregate, of $100,000, other than ordinary course advances for travel expenses;
      or (iv) sold, exchanged or otherwise disposed of any of its assets or rights,
      other than the sale of its inventory in the ordinary course of
      business.

     

    
      
        
        

      

      
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    (c)           For
      the purposes of subsections (a) and (b) above, all indebtedness, liabilities,
      agreements, understandings, instruments, contracts and proposed transactions
      involving the same person or entity (including persons or entities the Company
      or any Subsidiary of the Company has reason to believe are affiliated therewith)
      shall be aggregated for the purpose of meeting the individual minimum dollar
      amounts of such subsections.

     

    (d)           The
      Company maintains disclosure controls and procedures (“Disclosure Controls”)
      designed to ensure that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized, and reported, within the time periods specified in the
      rules and forms of the Securities and Exchange Commission (“SEC”).

     

    (e)           The
      Company makes and keep books, records, and accounts, that, in reasonable detail,
      accurately and fairly reflect the transactions and dispositions of the Company’s
      assets.  The Company maintains internal control over financial
      reporting (“Financial Reporting Controls”) designed by, or under the supervision
      of, the Company’s principal executive and principal financial officers, and
      effected by the Company’s board of directors, management, and other personnel,
      to provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles (“GAAP”), including
      that:

     

    (i)           transactions
      are executed in accordance with management’s general or specific
      authorization;

     

    (ii)           unauthorized
      acquisition, use, or disposition of the Company’s assets that could have a
      material effect on the financial statements are prevented or timely
      detected;

     

    (iii)           transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that the Company’s receipts and expenditures are being
      made only in accordance with authorizations of the Company’s management and
      board of directors;

     

    (iv)           transactions
      are recorded as necessary to maintain accountability for assets;
      and

     

    (v)           the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals, and appropriate action is taken with respect to any
      differences.

     

    (f)           In
      its From 10_Q for the quarter ended June 30, 2007 and in its Form 10-K for
      the
      year ended December 31, 2006, the Company has disclosed that its Disclosure
      Controls and Financing Reporting Controls are not effective and that it has
      one
      or more material weaknesses in its financial reporting.

     

    
      
        
        

      

      
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    4.7           Obligations
      to Related Parties.  Except as set forth on Schedule 4.7, there
      are no obligations of the Company or any of its Subsidiaries to officers,
      directors, stockholders or employees of the Company or any of its Subsidiaries
      other than:

     

    (a)           for
      payment of salary for services rendered and for bonus payments;

     

    (b)           reimbursement
      for reasonable expenses incurred on behalf of the Company and its
      Subsidiaries;

     

    (c)           for
      other standard employee benefits made generally available to all employees
      (including stock option agreements outstanding under any stock option plan
      approved by the Board of Directors of the Company and each Subsidiary of the
      Company, as applicable); and

     

    (d)           obligations
      listed in the Company’s and each of its Subsidiary’s financial statements or
      disclosed in any of the Company’s Exchange Act Filings.

     

    Except
      as
      described above or set forth on Schedule 4.7, none of the officers, directors
      or, to the best of the Company’s knowledge, key employees or stockholders of the
      Company or any of its Subsidiaries or any members of their immediate families,
      are indebted to the Company or any of its Subsidiaries, individually or in
      the
      aggregate, in excess of $50,000 or have any direct or indirect ownership
      interest in any firm or corporation with which the Company or any of its
      Subsidiaries is affiliated or with which the Company or any of its Subsidiaries
      has a business relationship, or any firm or corporation which competes with
      the
      Company or any of its Subsidiaries, other than passive investments in publicly
      traded companies (representing less than one percent (1%) of such company)
      which
      may compete with the Company or any of its Subsidiaries.  Except as
      described above, no officer, director or stockholder of the Company or any
      of
      its Subsidiaries, or any member of their immediate families, is, directly or
      indirectly, interested in any material contract with the Company or any of
      its
      Subsidiaries and no agreements, understandings or proposed transactions are
      contemplated between the Company or any of its Subsidiaries and any such
      person.  Except as set forth on Schedule 4.7, neither the Company nor
      any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of
      any
      other person or entity.

     

    4.8           Changes.  Since
      the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in
      any
      Schedule to this Agreement or to any of the Related Agreements, there has not
      been:

     

    (a)           any
      change in the business, assets, liabilities, condition (financial or otherwise),
      properties, operations or prospects of the Company or any of its Subsidiaries,
      which individually or in the aggregate has had, or could reasonably be expected
      to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (b)           any
      resignation or termination of any officer, key employee or group of employees
      of
      the Company or any of its Subsidiaries;

     

    
      
        
        

      

      
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    (c)           any
      material change, except in the ordinary course of business, in the contingent
      obligations of the Company or any of its Subsidiaries by way of guaranty,
      endorsement, indemnity, warranty or otherwise;

     

    (d)           any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

     

    (e)           any
      waiver by the Company or any of its Subsidiaries of a valuable right or of
      a
      material debt owed to it;

     

    (f)           any
      direct or indirect loans made by the Company or any of its Subsidiaries to
      any
      stockholder, employee, officer or director of the Company or any of its
      Subsidiaries, other than advances made in the ordinary course of
      business;

     

    (g)           any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder of the Company or any of its
      Subsidiaries;

     

    (h)           any
      declaration or payment of any dividend or other distribution of the assets
      of
      the Company or any of its Subsidiaries;

     

    (i)           any
      labor organization activity related to the Company or any of its
      Subsidiaries;

     

    (j)           any
      debt, obligation or liability incurred, assumed or guaranteed by the Company
      or
      any of its Subsidiaries, except those for immaterial amounts and for current
      liabilities incurred in the ordinary course of business;

     

    (k)           any
      sale, assignment or transfer of any patents, trademarks, copyrights, trade
      secrets or other intangible assets owned by the Company or any of its
      Subsidiaries;

     

    (l)           any
      change in any material agreement to which the Company or any of its Subsidiaries
      is a party or by which either the Company or any of its Subsidiaries is bound
      which either individually or in the aggregate has had, or could reasonably
      be
      expected to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (m)           any
      other event or condition of any character that, either individually or in the
      aggregate, has had, or could reasonably be expected to have, individually or
      in
      the aggregate, a Material Adverse Effect; or

     

    (n)           any
      arrangement or commitment by the Company or any of its Subsidiaries to do any
      of
      the acts described in subsection (a) through (m) above.

     

    
      
        
        

      

      
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    4.9           Title
      to Properties and Assets; Liens, Etc.  Except as set forth on
      Schedule 4.9, each of the Company and each of its Subsidiaries has good and
      marketable title to its properties and assets, and good title to its leasehold
      interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
      or charge, other than:

     

    (a)           those
      resulting from taxes which have not yet become delinquent;

     

    (b)           minor
      liens and encumbrances which do not materially detract from the value of the
      property subject thereto or materially impair the operations of the Company
      or
      any of its Subsidiaries, so long as in each such case, such liens and
      encumbrances have no effect on the lien priority of the Purchaser in such
      property; and

     

    (c)           those
      that have otherwise arisen in the ordinary course of business, so long as they
      have no effect on the lien priority of the Purchaser therein.

     

    All
      facilities, machinery, equipment, fixtures, vehicles and other properties owned,
      leased or used by the Company and its Subsidiaries are in good operating
      condition and repair and are reasonably fit and usable for the purposes for
      which they are being used.  Except as set forth on Schedule 4.9, the
      Company and its Subsidiaries are in compliance with all material terms of each
      lease to which it is a party or is otherwise bound.

     

    4.10           Intellectual
      Property.

     

    (a)           Each
      of the Company and each of its Subsidiaries owns or possesses sufficient legal
      rights to all patents, trademarks, service marks, trade names, copyrights,
      trade
      secrets, licenses, information and other proprietary rights and processes
      necessary for its business as now conducted and, to the Company’s knowledge, as
      presently proposed to be conducted (the “Intellectual Property”), without any
      known infringement of the rights of others.  There are no outstanding
      options, licenses or agreements of any kind relating to the foregoing
      proprietary rights, nor is the Company or any of its Subsidiaries bound by
      or a
      party to any options, licenses or agreements of any kind with respect to the
      patents, trademarks, service marks, trade names, copyrights, trade secrets,
      licenses, information and other proprietary rights and processes of any other
      person or entity other than such licenses or agreements arising from the
      purchase of “off the shelf” or standard products.

     

    (b)           Neither
      the Company nor any of its Subsidiaries has received any communications alleging
      that the Company or any of its Subsidiaries has violated any of the patents,
      trademarks, service marks, trade names, copyrights or trade secrets or other
      proprietary rights of any other person or entity, nor is the Company or any
      of
      its Subsidiaries aware of any basis therefore.

     

    (c)           The
      Company does not believe it is or will be necessary to utilize any inventions,
      trade secrets or proprietary information of any of its employees made prior
      to
      their employment by the Company or any of its Subsidiaries, except for
      inventions, trade secrets or proprietary information that have been rightfully
      assigned to the Company or any of its Subsidiaries.

     

    
      
        
        

      

      
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    4.11           Compliance
      with Other Instruments.  Neither the Company nor any of its
      Subsidiaries is in violation or default of (x) any term of its Charter or
      Bylaws, or (y) except as set forth on Schedule 4.11, any provision of any
      indebtedness, mortgage, indenture, contract, agreement or instrument to which
      it
      is party or by which it is bound or of any judgment, decree, order or writ,
      which violation or default, in the case of this clause (y), has had, or could
      reasonably be expected to have, either individually or in the aggregate, a
      Material Adverse Effect.  The execution, delivery and performance of
      and compliance with this Agreement and the Related Agreements to which it is
      a
      party, and the issuance and sale of the Note by the Company and the other
      Securities by the Company each pursuant hereto and thereto, will not, with
      or
      without the passage of time or giving of notice, result in any such material
      violation, or be in conflict with or constitute a default under any such term
      or
      provision, or result in the creation of any mortgage, pledge, lien, encumbrance
      or charge upon any of the properties or assets of the Company or any of its
      Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
      of any permit, license, authorization or approval applicable to the Company,
      its
      business or operations or any of its assets or properties.

     

    4.12           Litigation.  Except
      as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding
      or
      investigation pending or, to the Company’s knowledge, currently threatened
      against the Company or any of its Subsidiaries that prevents the Company or
      any
      of its Subsidiaries from entering into this Agreement or the other Related
      Agreements, or from consummating the transactions contemplated hereby or
      thereby, or which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect or any change in
      the
      current equity ownership of the Company or any of its Subsidiaries, nor is
      the
      Company aware that there is any basis to assert any of the
      foregoing.  Neither the Company nor any of its Subsidiaries is a party
      to or subject to the provisions of any order, writ, injunction, judgment or
      decree of any court or government agency or instrumentality.  There is
      no action, suit, proceeding or investigation by the Company or any of its
      Subsidiaries currently pending or which the Company or any of its Subsidiaries
      intends to initiate.

     

    4.13           Tax
      Returns and Payments.  Each of the Company and each of its
      Subsidiaries has timely filed all tax returns (federal, state and local)
      required to be filed by it.  All taxes shown to be due and payable on
      such returns, any assessments imposed, and all other taxes due and payable
      by
      the Company or any of its Subsidiaries on or before the Closing, have been
      paid
      or will be paid prior to the time they become delinquent.  Except as
      set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries
      has been advised:

     

    (a)           that
      any of its returns, federal, state or other, have been or are being audited
      as
      of the date hereof; or

     

    (b)           of
      any adjustment, deficiency, assessment or court decision in respect of its
      federal, state or other taxes.

     

    The
      Company has no knowledge of any liability for any tax to be imposed upon its
      properties or assets as of the date of this Agreement that is not adequately
      provided for.

     

    
      
        
        

      

      
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    4.14           Employees.  Except
      as set forth on Schedule 4.14, neither the Company nor any of its Subsidiaries
      has any collective bargaining agreements with any of its
      employees.  There is no labor union organizing activity pending or, to
      the Company’s knowledge, threatened with respect to the Company or any of its
      Subsidiaries.  Except as disclosed in the Exchange Act Filings or on
      Schedule 4.14, neither the Company nor any of its Subsidiaries is a party to
      or
      bound by any currently effective employment contract, deferred compensation
      arrangement, bonus plan, incentive plan, profit sharing plan, retirement
      agreement or other employee compensation plan or agreement.  To the
      Company’s knowledge, no employee of the Company or any of its Subsidiaries, nor
      any consultant with whom the Company or any of its Subsidiaries has contracted,
      is in violation of any term of any employment contract, proprietary information
      agreement or any other agreement relating to the right of any such individual
      to
      be employed by, or to contract with, the Company or any of its Subsidiaries
      because of the nature of the business to be conducted by the Company or any
      of
      its Subsidiaries; and to the Company’s knowledge the continued employment by the
      Company and its Subsidiaries of their present employees, and the performance
      of
      the Company’s and its Subsidiaries’ contracts with its independent contractors,
      will not result in any such violation.  Neither the Company nor any of
      its Subsidiaries is aware that any of its employees is obligated under any
      contract (including licenses, covenants or commitments of any nature) or other
      agreement, or subject to any judgment, decree or order of any court or
      administrative agency that would interfere with their duties to the Company
      or
      any of its Subsidiaries.  Neither the Company nor any of its
      Subsidiaries has received any notice alleging that any such violation has
      occurred.  Except for employees who have a current effective
      employment agreement with the Company or any of its Subsidiaries, no employee
      of
      the Company or any of its Subsidiaries has been granted the right to continued
      employment by the Company or any of its Subsidiaries or to any material
      compensation following termination of employment with the Company or any of
      its
      Subsidiaries.  Except as set forth on Schedule 4.14, the Company is
      not aware that any officer, key employee or group of employees intends to
      terminate his, her or their employment with the Company or any of its
      Subsidiaries, nor does the Company or any of its Subsidiaries have a present
      intention to terminate the employment of any officer, key employee or group
      of
      employees.

     

    4.15           Registration
      Rights and Voting Rights.  Except as set forth on
      Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
      Company nor any of its Subsidiaries is presently under any obligation, and
      neither the Company nor any of its Subsidiaries has granted any rights, to
      register any of the Company’s or its Subsidiaries’ presently outstanding
      securities or any of its securities that may hereafter be
      issued.  Except as set forth on Schedule 4.15 and except as disclosed
      in Exchange Act Filings, to the Company’s knowledge, no stockholder of the
      Company or any of its Subsidiaries has entered into any agreement with respect
      to the voting of equity securities of the Company or any of its
      Subsidiaries.

     

    4.16           Compliance
      with Laws; Permits.  Neither the Company nor any of its
      Subsidiaries is in violation of any provision of the Sarbanes-Oxley Act of
      2002
      or any SEC related regulation or rule or any rule of the Principal Market (as
      hereafter defined) promulgated thereunder or any other applicable statute,
      rule,
      regulation, order or restriction of any domestic or foreign government or any
      instrumentality or agency thereof in respect of the conduct of its business
      or
      the ownership of its properties which has had, or could reasonably be expected
      to have, either individually or in the aggregate, a Material Adverse
      Effect.  No governmental orders, permissions, consents, approvals or
      authorizations are required to be obtained and no registrations or declarations
      are required to be filed in connection with the execution and delivery of this
      Agreement or any other Related Agreement and the issuance of any of the
      Securities, except such as have been duly and validly obtained or filed, or
      with
      respect to any filings that must be made after the Closing, as will be filed
      in
      a timely manner.  Each of the Company and its Subsidiaries has all
      material franchises, permits, licenses and any similar authority necessary
      for
      the conduct of its business as now being conducted by it, the lack of which
      could, either individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect.

     

    
      
        
        

      

      
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    4.17           Environmental
      and Safety Laws.  Neither the Company nor any of its Subsidiaries
      is in violation of any applicable statute, law or regulation relating to the
      environment or occupational health and safety, and to its knowledge, no material
      expenditures are or will be required in order to comply with any such existing
      statute, law or regulation.  Except as set forth on Schedule 4.17, no
      Hazardous Materials (as defined below) are used or have been used, stored,
      or
      disposed of by the Company or any of its Subsidiaries or, to the Company’s
      knowledge, by any other person or entity on any property owned, leased or used
      by the Company or any of its Subsidiaries.  For the purposes of the
      preceding sentence, “Hazardous Materials” shall mean:

     

    (a)           materials
      which are listed or otherwise defined as “hazardous” or “toxic” under any
      applicable local, state, federal and/or foreign laws and regulations that govern
      the existence and/or remedy of contamination on property, the protection of
      the
      environment from contamination, the control of hazardous wastes, or other
      activities involving hazardous substances, including building materials;
      or

     

    (b)           any
      petroleum products or nuclear materials.

     

    4.18           Valid
      Offering.  Assuming the accuracy of the representations and
      warranties of the Purchaser contained in this Agreement, the offer, sale and
      issuance of the Securities will be exempt from the registration requirements
      of
      the Securities Act of 1933, as amended (the “Securities Act”), and will have
      been registered or qualified (or are exempt from registration and qualification)
      under the registration, permit or qualification requirements of all applicable
      state securities laws.

     

    4.19           Full
      Disclosure.  Each of the Company and each of its Subsidiaries has
      provided the Purchaser with all information requested by the Purchaser in
      connection with its decision to purchase the Note and Warrant, including all
      information the Company and its Subsidiaries believe is reasonably necessary
      to
      make such investment decision.  Neither this Agreement, the Related
      Agreements, the exhibits and schedules hereto and thereto nor any other document
      delivered by the Company or any of its Subsidiaries to Purchaser or its
      attorneys or agents in connection herewith or therewith or with the transactions
      contemplated hereby or thereby, contain any untrue statement of a material
      fact
      nor omit to state a material fact necessary in order to make the statements
      contained herein or therein, in light of the circumstances in which they are
      made, not misleading.  Any financial projections and other estimates
      provided to the Purchaser by the Company or any of its Subsidiaries were based
      on the Company’s and its Subsidiaries’ experience in the industry and on
      assumptions of fact and opinion as to future events which the Company or any
      of
      its Subsidiaries, at the date of the issuance of such projections or estimates,
      believed to be reasonable.

     

    
      
        
        

      

      
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    4.20           Insurance.  Each
      of the Company and each of its Subsidiaries has general commercial, product
      liability, fire and casualty insurance policies with coverages which the Company
      believes are customary for companies similarly situated to the Company and
      its
      Subsidiaries in the same or similar business.

     

    4.21           SEC
      Reports.  Except as set forth on Schedule 4.21, the Company has
      filed all proxy statements, reports and other documents required to be filed
      by
      it under the Securities Exchange Act 1934, as amended (the “Exchange
      Act”).  The Company has furnished the Purchaser copies
      of:  (i) its Annual Reports on Form 10-K for its fiscal years ended
      December 31, 2006; and (ii) the Form 8-K filings which it has made during the
      fiscal year 2007 to date (collectively, the “SEC Reports”).  Except as
      set forth on Schedule 4.21, each SEC Report was, at the time of its filing,
      in
      substantial compliance with the requirements of its respective form and none
      of
      the SEC Reports, nor the financial statements (and the notes thereto) included
      in the SEC Reports, as of their respective filing dates, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading.

     

    4.22           Listing.  The
      Company’s Common Stock is listed or quoted, as applicable, on a Principal Market
      (as hereafter defined) and satisfies and at all times hereafter will satisfy,
      all requirements for the continuation of such listing or quotation, as
      applicable.  The Company has not received any notice that its Common
      Stock will be delisted from, or no longer quoted on, as applicable, the
      Principal Market or that its Common Stock does not meet all requirements for
      such listing or quotation, as applicable.  For purposes hereof, the
      term “Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ
      Capital Market, NASDAQ National Markets System, American Stock Exchange or
      New
      York Stock Exchange (whichever of the foregoing is at the time the principal
      trading exchange or market for the Common Stock).

     

    4.23           No
      Integrated Offering.  Neither the Company, nor any of its
      Subsidiaries or affiliates, nor any person acting on its or 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 cause the offering
      of
      the Securities pursuant to this Agreement or any of the Related Agreements
      to be
      integrated with prior offerings by the Company for purposes of the Securities
      Act which would prevent the Company from selling the Securities pursuant to
      Rule
      506 under the Securities Act, or any applicable exchange-related stockholder
      approval provisions, nor will the Company or any of its affiliates or
      Subsidiaries take any action or steps that would cause the offering of the
      Securities to be integrated with other offerings.

     

    4.24           Stop
      Transfer.  The Securities are restricted securities as of the date
      of this Agreement.  Neither the Company nor any of its Subsidiaries
      will issue any stop transfer order or other order impeding the sale and delivery
      of any of the Securities at such time as the Securities are registered for
      public sale or an exemption from registration is available, except as required
      by state and federal securities laws.

     

    4.25           Dilution.  The
      Company specifically acknowledges that its obligation to issue the shares of
      Common Stock upon exercise of the Warrants are  binding upon the
      Company and enforceable regardless of the dilution such issuance may have on
      the
      ownership interests of other shareholders of the Company.

     

    
      
        
        

      

      
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    4.26           Patriot
      Act.   The Company certifies that, to the best of Company’s
      knowledge, neither the Company nor any of its Subsidiaries has been designated,
      nor is or shall be owned or controlled, by a “suspected terrorist” as defined in
      Executive Order 13224.  The Company hereby acknowledges that the
      Purchaser seeks to comply with all applicable laws concerning money laundering
      and related activities.  In furtherance of those efforts, the Company
      hereby represents, warrants and covenants that:  (i) none of the cash
      or property that the Company or any of its Subsidiaries will pay or will
      contribute to the Purchaser has been or shall be derived from, or related to,
      any activity that is deemed criminal under United States law; and (ii) no
      contribution or payment by the Company or any of its Subsidiaries to the
      Purchaser, to the extent that they are within the Company’s and/or its
      Subsidiaries’ control shall cause the Purchaser to be in violation of the United
      States Bank Secrecy Act, the United States International Money Laundering
      Control Act of 1986 or the United States International Money Laundering
      Abatement and Anti-Terrorist Financing Act of 2001.  The Company shall
      promptly notify the Purchaser if any of these representations, warranties or
      covenants ceases to be true and accurate regarding the Company or any of its
      Subsidiaries.  The Company shall provide the Purchaser all additional
      information regarding the Company or any of its Subsidiaries that the Purchaser
      deems necessary or convenient to ensure compliance with all applicable laws
      concerning money laundering and similar activities.  The Company
      understands and agrees that if at any time it is discovered that any of the
      foregoing representations, warranties or covenants are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      or similar activities, the Purchaser may undertake appropriate actions to ensure
      compliance with applicable law or regulation, including but not limited to
      segregation and/or redemption of the Purchaser’s investment in the
      Company.  The Company further understands that the Purchaser may
      release confidential information about the Company and its Subsidiaries and,
      if
      applicable, any underlying beneficial owners, to proper authorities if the
      Purchaser, in its sole discretion, determines that it is in the best interests
      of the Purchaser in light of relevant rules and regulations under the laws
      set
      forth in subsection (ii) above.

     

    4.27           ERISA.  Based
      upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and
      the regulations and published interpretations thereunder:  (i) neither
      the Company nor any of its Subsidiaries has engaged in any Prohibited
      Transactions (as defined in Section 406 of ERISA and Section 4975 of theInternal
      Revenue Code of 1986, as amended (the “Code”)); (ii) each of the Company
      and each of its Subsidiaries has met all applicable minimum funding requirements
      under Section 302 of ERISA in respect of its plans; (iii) neither the Company
      nor any of its Subsidiaries has any knowledge of any event or occurrence which
      would cause the Pension Benefit Guaranty Corporation to institute proceedings
      under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither
      the Company nor any of its Subsidiaries has any fiduciary responsibility for
      investments with respect to any plan existing for the benefit of persons other
      than the Company’s or such Subsidiary’s employees; and (v) neither the Company
      nor any of its Subsidiaries has withdrawn, completely or partially, from any
      multi-employer pension plan so as to incur liability under the Multiemployer
      Pension Plan Amendments Act of 1980.

     

    
      
        
        

      

      
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    5.           Representations
      and Warranties of the Purchaser.  The Purchaser hereby represents
      and warrants to the Company as follows (such representations and warranties
      do
      not lessen or obviate the representations and warranties of the Company set
      forth in this Agreement):

     

    5.1           No
      Shorting.  The Purchaser or any of its affiliates and investment
      partners has not, will not and will not cause any person or entity, to directly
      engage in “short sales” of the Company’s Common Stock as long as the Note shall
      be outstanding.

     

    5.2           Requisite
      Power and Authority.  The Purchaser has all necessary power and
      authority under all applicable provisions of law to execute and deliver this
      Agreement and the Related Agreements and to carry out their
      provisions.  All corporate action on the Purchaser’s part required for
      the lawful execution and delivery of this Agreement and the Related Agreements
      have been or will be effectively taken prior to the Closing.  Upon
      their execution and delivery, this Agreement and the Related Agreements will
      be
      valid and binding obligations of the Purchaser, enforceable in accordance with
      their terms, except:

     

    (a)           as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b)           as
      limited by general principles of equity that restrict the availability of
      equitable and legal remedies.

     

    5.3           Investment
      Representations.  The Purchaser understands that the Securities
      are being offered and sold pursuant to an exemption from registration contained
      in the Securities Act based in part upon the Purchaser’s representations
      contained in this Agreement, including, without limitation, that the Purchaser
      is an “accredited investor” within the meaning of Regulation D under the
      Securities Act of 1933, as amended (the “Securities Act”).  The
      Purchaser confirms that it has received or has had full access to all the
      information it considers necessary or appropriate to make an informed investment
      decision with respect to the Note and the Warrants to be purchased by it under
      this Agreement and the Warrant Shares acquired by it upon the exercise of the
      Warrants, respectively.  The Purchaser further confirms that it has
      had an opportunity to ask questions and receive answers from the Company
      regarding the Company’s and its Subsidiaries’ business, management and financial
      affairs and the terms and conditions of the Offering, the Note, the Warrants
      and
      the Securities and to obtain additional information (to the extent the Company
      possessed such information or could acquire it without unreasonable effort
      or
      expense) necessary to verify any information furnished to the Purchaser or
      to
      which the Purchaser had access.

     

    5.4           The
      Purchaser Bears Economic Risk.  The Purchaser has substantial
      experience in evaluating and investing in private placement transactions of
      securities in companies similar to the Company so that it is capable of
      evaluating the merits and risks of its investment in the Company and has the
      capacity to protect its own interests.  The Purchaser must bear the
      economic risk of this investment until the Securities are sold pursuant to:
      (i)
      an effective registration statement under the Securities Act; or (ii) an
      exemption from registration is available with respect to such sale.

     

    
      
        
        

      

      
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    5.5           Acquisition
      for Own Account.  The Purchaser is acquiring the Note and Warrants
      and the Warrant Shares for the Purchaser’s own account for investment only, and
      not as a nominee or agent and not with a view towards or for resale in
      connection with their distribution.

     

    5.6           The
      Purchaser Can Protect Its Interest.  The Purchaser represents that
      by reason of its, or of its management’s, business and financial experience, the
      Purchaser has the capacity to evaluate the merits and risks of its investment
      in
      the Note, the Warrants and the Securities and to protect its own interests
      in
      connection with the transactions contemplated in this Agreement and the Related
      Agreements.  Further, the Purchaser is aware of no publication of any
      advertisement in connection with the transactions contemplated in the Agreement
      or the Related Agreements.

     

    5.7           Accredited
      Investor.  The Purchaser represents that it is an accredited
      investor within the meaning of Regulation D under the Securities
      Act.

     

    5.8           Legends.

     

    (a)           The
      Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall
      bear a legend which shall be in substantially the following form until such
      shares are covered by an effective registration statement filed with the
      SEC:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
      LAWS.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
      HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
      SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO JMAR TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
      REQUIRED.”

     

    (b)           The
      Warrants shall bear substantially the following legend:

     

    “THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON SHARES ISSUABLE
      UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
      HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
      WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
      STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO JMAR
      TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

    
      
        
        

      

      
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    6.           Covenants
      of the Company.  The Company covenants and agrees with the
      Purchaser as follows:

     

    6.1           Stop-Orders.  The
      Company will advise the Purchaser, promptly after it receives notice of issuance
      by the SEC, any state securities commission or any other regulatory authority
      of
      any stop order or of any order preventing or suspending any offering of any
      securities of the Company, or of the suspension of the qualification of the
      Common Stock of the Company for offering or sale in any jurisdiction, or the
      initiation of any proceeding for any such purpose.

     

    6.2           Listing.  The
      Company shall promptly secure the listing or quotation, as applicable, of the
      shares of Common Stock issuable upon the exercise of the Warrants on the
      Principal Market upon which shares of Common Stock are listed or quoted for
      trading, as applicable (subject to official notice of issuance) and shall
      maintain such listing or quotation, as applicable, so long as any other shares
      of Common Stock shall be so listed or quoted, as applicable.  The
      Company will maintain the listing or quotation, as applicable, of its Common
      Stock on the Principal Market, and will comply in all material respects with
      the
      Company’s reporting, filing and other obligations under the bylaws or rules of
      the National Association of Securities Dealers (“NASD”) and such exchanges, as
      applicable.

     

    6.3           Market
      Regulations.  The Company shall notify the SEC, NASD and
      applicable state authorities, in accordance with their requirements, of the
      transactions contemplated by this Agreement, and shall take all other necessary
      action and proceedings as may be required and permitted by applicable law,
      rule
      and regulation, for the legal and valid issuance of the Securities to the
      Purchaser and promptly provide copies thereof to the Purchaser.

     

    6.4           Reporting
      Requirements.  The
      Company will deliver, or cause to be delivered, to the Purchaser each
      of
      the following, which shall be in form and detail acceptable to the
      Purchaser:

     

    (a)           As
      soon as available, and in any event within ninety (90) days after the end of
      each fiscal year of the Company, each of the Company’s and each of its
      Subsidiaries’ audited financial statements with a report of independent
      certified public accountants of recognized standing selected by the Company
      and
      acceptable to the Purchaser (the “Accountants”), which annual financial
      statements shall be without qualification (except for a going concern
      qualification) and shall include each of the Company’s and each of its
      Subsidiaries’ balance sheet as at the end of such fiscal year and the related
      statements of each of the Company’s and each of its Subsidiaries’ income,
      retained earnings and cash flows for the fiscal year then ended, prepared on
      a
      consolidated basis to include the Company, each Subsidiary of the Company and
      each of their respective affiliates, all in reasonable detail and prepared
      in
      accordance with GAAP, together with (i) if and when available, copies of any
      management letters prepared by the Accountants; and (ii) a certificate of the
      Company’s President, Chief Executive Officer or Chief Financial Officer stating
      that such financial statements have been prepared in accordance with GAAP and
      whether or not such officer has knowledge of the occurrence of any Event of
      Default  (as defined in the Note) and, if so, stating in reasonable
      detail the facts with respect thereto;

     

    
      
        
        

      

      
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    (b)           As
      soon as available and in any event within forty five (45) days after the end
      of
      each fiscal quarter of the Company, an unaudited/internal balance sheet and
      statements of income, retained earnings and cash flows of the Company and each
      of its Subsidiaries as at the end of and for such quarter and for the year
      to
      date period then ended, prepared on a consolidated basis to include all the
      Company, each Subsidiary of the Company and each of their respective affiliates,
      in reasonable detail and stating in comparative form the figures for the
      corresponding date and periods in the previous year, all prepared in accordance
      with GAAP, subject to year-end adjustments and accompanied by a certificate
      of
      the Company’s President, Chief Executive Officer or Chief Financial Officer,
      stating (i) that such financial statements have been prepared in accordance
      with
      GAAP, subject to year-end audit adjustments, and (ii) whether or not such
      officer has knowledge of the occurrence of any Event of Default (as defined
      in
      the Note) not theretofore reported and remedied and, if so, stating in
      reasonable detail the facts with respect thereto;

     

    (c)           As
      soon as available and in any event within fifteen (15) days after the end of
      each calendar month, an unaudited/internal balance sheet and statements of
      income, retained earnings and cash flows of each of the Company and its
      Subsidiaries as at the end of and for such month and for the year to date period
      then ended, prepared on a consolidated basis to include the Company, each
      Subsidiary of the Company and each of their respective affiliates, in reasonable
      detail and stating in comparative form the figures for the corresponding date
      and periods in the previous year, all prepared in accordance with GAAP, subject
      to year-end adjustments and accompanied by a certificate of the Company’s
      President, Chief Executive Officer or Chief Financial Officer, stating (i)
      that
      such financial statements have been prepared in accordance with GAAP, subject
      to
      year-end audit adjustments, and (ii) whether or not such officer has knowledge
      of the occurrence of any Event of Default (as defined in the Note) not
      theretofore reported and remedied and, if so, stating in reasonable detail
      the
      facts with respect thereto;

     

    (d)           The
      Company shall timely file with the SEC all reports required to be filed pursuant
      to the Exchange Act and refrain from terminating its status as an issuer
      required by the Exchange Act to file reports thereunder even if the Exchange
      Act
      or the rules or regulations thereunder would permit such
      termination.  Promptly after (i) the filing thereof, copies of the
      Company’s most recent registration statements and annual, quarterly, monthly or
      other regular reports which the Company files with the Securities and Exchange
      Commission (the “SEC”), and (ii) the issuance thereof, copies of such
      financial statements, reports and proxy statements as the Company shall send
      to
      its stockholders; and

     

    (e)           The
      Company shall deliver, or cause the applicable Subsidiary of the Company to
      deliver, such other information as the Purchaser shall reasonably
      request.

     

    6.5           Use
      of Funds.  The Company shall use the proceeds of the sale of the
      Note and the Warrants for general working capital purposes only (it being
      understood that $6,420,600.61 of the proceeds of the Note will be deposited
      in
      the Restricted Account on the Closing Date and shall be subject to the terms
      and
      conditions of the Restricted Account Agreement and the Restricted Account Side
      Letter).

     

    
      
        
        

      

      
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    6.6           Access
      to Facilities.  Each of the Company and each of its Subsidiaries
      will permit any representatives designated by the Purchaser (or any successor
      of
      the Purchaser), upon reasonable notice and during normal business hours, at
      such
      person’s expense and accompanied by a representative of the Company or any
      Subsidiary (provided that no such prior notice shall be required to be given
      and
      no such representative of the Company or any Subsidiary shall be required to
      accompany the Purchaser in the event the Purchaser believes such access is
      necessary to preserve or protect the Collateral (as defined in the Pledge and
      Security Agreement and the Security Agreement, as such terms are defined in
      the
      Reaffirmation Agreement or following the occurrence and during the continuance
      of an Event of Default (as defined in the Note)), to:

     

    (a)           visit
      and inspect any of the properties of the Company or any of its
      Subsidiaries;

     

    (b)           examine
      the corporate and financial records of the Company or any of its Subsidiaries
      (unless such examination is not permitted by federal, state or local law or
      by
      contract) and make copies thereof or extracts therefrom; and

     

    (c)           discuss
      the affairs, finances and accounts of the Company or any of its Subsidiaries
      with the directors, officers and independent accountants of the Company or
      any
      of its Subsidiaries.

     

    Notwithstanding
      the foregoing, neither the Company nor any of its Subsidiaries will provide
      any
      material, non-public information to the Purchaser unless the Purchaser signs
      a
      confidentiality agreement and otherwise complies with Regulation FD, under
      the
      federal securities laws.

     

    6.7           Taxes.  Each
      of the Company and each of its Subsidiaries will promptly pay and discharge,
      or
      cause to be paid and discharged, when due and payable, all taxes, assessments
      and governmental charges or levies imposed upon the income, profits, property
      or
      business of the Company and its Subsidiaries; provided, however, that any such
      tax, assessment, charge or levy need not be paid currently if (i) the validity
      thereof shall currently and diligently be contested in good faith by appropriate
      proceedings, (ii) such tax, assessment, charge or levy shall have no effect
      on
      the lien priority of the Purchaser in any property of the Company or any of
      its
      Subsidiaries and (iii) if the Company and/or such Subsidiary shall have set
      aside on its books adequate reserves with respect thereto in accordance with
      GAAP; and provided, further, that the Company and its Subsidiaries will pay
      all
      such taxes, assessments, charges or levies forthwith upon the commencement
      of
      proceedings to foreclose any lien which may have attached as security
      therefor.

     

    6.8           Insurance.  (i)
      The Company shall bear the full risk of loss from any loss of any nature
      whatsoever with respect to the Collateral (as defined in each of the Pledge
      and
      Security Agreement and the Security Agreement, (as defined in the Reaffirmation
      Agreement) and each other security agreement entered into by the Company and/or
      any of its Subsidiaries for the benefit of the Purchaser) and the Company and
      each of its Subsidiaries will, jointly and severally, bear the full risk of
      loss
      from any loss of any nature whatsoever with respect to the assets pledged to
      the
      Purchaser as security for the Obligations (as defined in the Pledge and Security
      Agreement and the Security Agreement).   Furthermore, the Company
      will insure or cause the Collateral to be insured in the Purchaser’s name as an
      additional insured and lender loss payee, with an appropriate loss payable
      endorsement in form and substance satisfactory to the Purchaser, against loss
      or
      damage by fire, flood, sprinkler leakage, theft, burglary, pilferage, loss
      in
      transit and other risks customarily insured against by companies in similar
      business similarly situated as the Company and its Subsidiaries including but
      not limited to workers compensation, public and product liability and business
      interruption, and such other hazards as the Purchaser shall specify in amounts
      and under insurance policies and bonds by insurers acceptable to the Purchaser
      and all premiums thereon shall be paid by the Company and the policies delivered
      to the Purchaser.  If the Company or any of its Subsidiaries fails to
      obtain the insurance and in such amounts of coverage as otherwise required
      pursuant to this Section 6.8, the Purchaser may procure such insurance and
      the
      cost thereof shall be promptly reimbursed by the Company and shall constitute
      Obligations.

     

    
      
        
        

      

      
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    (ii)           The
      Company’s insurance coverage shall not be impaired or invalidated by any act or
      neglect of the Company or any of its Subsidiaries and the insurer will provide
      the Purchaser with no less than thirty (30) days notice prior of
      cancellation;

     

    (iii)           The
      Purchaser, in connection with its status as a lender loss payee, will be
      assigned at all times to a first lien position until such time as all the
      Purchaser’s Obligations have been indefeasibly satisfied in full. 

     

    6.9           Intellectual
      Property.  Each of the Company and each of its Subsidiaries shall
      maintain in full force and effect its existence, rights and franchises and
      all
      licenses and other rights to use Intellectual Property owned or possessed by
      it
      and reasonably deemed to be necessary to the conduct of its
      business.

     

    6.10           Properties.  Each
      of the Company and each of its Subsidiaries will keep its properties in good
      repair, working order and condition, reasonable wear and tear excepted, and
      from
      time to time make all needful and proper repairs, renewals, replacements,
      additions and improvements thereto; and, except as set forth on Schedule 6.10
      hereto, each of the Company and each of its Subsidiaries will at all times
      comply with each provision of all leases to which it is a party or under which
      it occupies property if the breach of such provision could, either individually
      or in the aggregate, reasonably be expected to have a Material Adverse
      Effect.

     

    6.11           Confidentiality.  The
      Company will not, and will not permit any of its Subsidiaries to, disclose,
      and
      will not include in any public announcement, the name of the Purchaser, unless
      expressly agreed to by the Purchaser or unless and until such disclosure is
      required by law or applicable regulation, and then only to the extent of such
      requirement.  Notwithstanding the foregoing, the Company may disclose
      the Purchaser’s identity and the terms of this Agreement to its current and
      prospective debt and equity financing sources.

     

    6.12           Required
      Approvals.  (I) For so long as twenty-five percent (25%) of the
      principal amount of the Note is outstanding, the Company, without the prior
      written consent of the Purchaser, shall not, and shall not permit any of its
      Subsidiaries to:

     

    
      
        
        

      

      
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    (a)           (i)
      directly or indirectly declare or pay any dividends, other than dividends paid
      to the Company or any of its wholly-owned Subsidiaries, (ii) issue any
      preferred stock that is mandatorily redeemable prior to the one year anniversary
      of the Maturity Date (as defined in the Note) or (iii) redeem any of its
      preferred stock or other equity interests;

     

    (b)           
      liquidate, dissolve or effect a material reorganization (it being understood
      that in no event shall the Company or any of its Subsidiaries dissolve,
      liquidate or merge with any other person or entity (unless, in the case of
      such
      a merger, the Company or, in the case of merger not involving the Company,
      such
      Subsidiary, as applicable, is the surviving entity);

     

    (c)           become
      subject to (including, without limitation, by way of amendment to or
      modification of) any agreement or instrument which by its terms would (under
      any
      circumstances) restrict the Company’s or any of its Subsidiaries, right to
      perform the provisions of this Agreement, any Related Agreement or any of the
      agreements contemplated hereby or thereby;

     

    (d)           materially
      alter or change the scope of the business of the Company and its Subsidiaries
      taken as a whole;

     

    (e)           (i)
      create, incur, assume or suffer to exist any indebtedness (exclusive of trade
      debt and debt incurred to finance the purchase of equipment (not in excess
      of
      five percent (5%) of the fair market value of the Company’s and its
      Subsidiaries’ assets)) whether secured or unsecured other than (x) the Company’s
      obligations owed to the Purchaser, (y) indebtedness set forth on Schedule
      6.12(e) attached hereto and made a part hereof and any refinancings or
      replacements thereof on terms no less favorable to the Purchaser than the
      indebtedness being refinanced or replaced, and (z) any indebtedness incurred
      in
      connection with the purchase of assets (other than equipment) in the ordinary
      course of business, or any refinancings or replacements thereof on terms no
      less
      favorable to the Purchaser than the indebtedness being refinanced or replaced,
      so long as any lien relating thereto shall only encumber the fixed assets so
      purchased and no other assets of the Company or any of its Subsidiaries; (ii)
      cancel any indebtedness owing to it in excess of $50,000 in the aggregate during
      any 12 month period; (iii) assume, guarantee, endorse or otherwise become
      directly or contingently liable in connection with any obligations of any other
      person or entity, except the endorsement of negotiable instruments by the
      Company or any Subsidiary thereof for deposit or collection or similar
      transactions in the ordinary course of business or guarantees of indebtedness
      otherwise permitted to be outstanding pursuant to this clause (e);
      or

     

    create
      or
      acquire any Subsidiary after the date hereof unless (i) such Subsidiary is
      a
      wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes a party
      to the Pledge and Security Agreement, the Security Agreement, and the Subsidiary
      Guaranty (either by executing a counterpart thereof or an assumption or joinder
      agreement in respect thereof) and, to the extent required by the Purchaser,
      satisfies each condition of this Agreement and the Related Agreements as if
      such
      Subsidiary were a Subsidiary on the Closing Date.

     

    
      
        
        

      

      
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    6.13           Reissuance
      of Securities.  The Company agrees to reissue certificates
      representing the Securities without the legends set forth in Section 5.8 above
      at such time as:

     

    (a)           the
      holder thereof is permitted to dispose of such Securities pursuant to Rule
      144(k) under the Securities Act; or

     

    (b)           upon
      resale subject to an effective registration statement after such Securities
      are
      registered under the Securities Act.

     

    The
      Company agrees to cooperate with the Purchaser in connection with all resales
      pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
      to
      allow such resales provided the Company and its counsel receive reasonably
      requested representations from the Purchaser and broker, if any.

     

    6.14           Opinion.  On
      the Closing Date, the Company will deliver to the Purchaser an opinion
      acceptable to the Purchaser from the Company’s external legal
      counsel.  The Company will provide, at the Company’s expense, such
      other legal opinions in the future as are deemed reasonably necessary by the
      Purchaser (and acceptable to the Purchaser) in connection with the exercise
      of
      the Warrants.

     

    6.15           Margin
      Stock.  The Company will not permit any of the proceeds of the
      Note or the Warrants to be used directly or indirectly to “purchase” or “carry”
“margin stock” or to repay indebtedness incurred to “purchase” or “carry”
“margin stock” within the respective meanings of each of the quoted terms under
      Regulation U of the Board of Governors of the Federal Reserve System as now
      and
      from time to time hereafter in effect.

     

    6.16           FIRPTA.  Neither
      the Company, nor any of its Subsidiaries, is a “United States real property
      holding corporation” as such term is defined in Section 897(c)(2) of the Code
      and Treasury Regulation Section 1.897-2 promulgated thereunder and neither
      the
      Company nor any of its Subsidiaries shall at any time take any action or
      otherwise acquire any interest in any asset or property to the extent the effect
      of which shall cause the Company and/or such Subsidiary, as the case may be,
      to
      be a “United States real property holding corporation” as such term is defined
      in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
      promulgated thereunder.

     

    6.17           Restricted
      Cash Disclosure.  The Company agrees that, in connection with its
      filing of its 8-K Report with the SEC concerning the transactions contemplated
      by this Agreement and the Related Agreements (such report, the “Laurus
      Transaction 8-K”) in a timely manner after the date hereof, it will disclose in
      such Laurus Transaction 8-K the amount of the proceeds of the Note issued to
      the
      Purchaser that has been placed in a restricted cash account and is subject
      to
      the terms and conditions of this Agreement and the Related
      Agreements.  Furthermore, the Company agrees to disclose in all public
      filings required by the Commission (where appropriate) following the filing
      of
      the Laurus Transaction 8-K, the existence of the restricted cash referred to
      in
      the immediately preceding sentence, together with the amount
      thereof.

     

    
      
        
        

      

      
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    6.18           Authorization
      and Reservation of Shares.  Subject to the Company obtaining the
      approval of its shareholders for an increase in authorized shares of common
      stock in accordance with Section 6.22 below, the Company shall at all times
      have
      authorized and reserved a sufficient number of shares of Common Stock to provide
      for the exercise of the Warrants.

     

    6.19           Vermont
      Operations.  The Company shall (i) discontinue all business
      operations at its Burlington Vermont location (“Burlington”) within forty five
      (45) days from and after the date hereof; and (ii) liquidate and/or transfer
      all
      Collateral (as defined in the Security Agreement referred to in the
      Reaffirmation Agreement among the Purchaser, the Company and certain of its
      Subsidiaries of even date herewith) located at Burlington to the Company’s San
      Diego location located at 10905 Technology Place, San Diego,
      California.

     

    6.20           Chief
      Financial Officer.  Within thirty (30) days from and after the
      date hereof, the Company shall identify and hire a Chief Financial Officer
      and
      assemble a management team with in-depth commercialization experience including
      marketing and sales capabilities for reliable market analysis and assessments,
      plus requisite product engineering, integration and testing skills responsive
      to
      market needs.

     

    6.21           Royalty
      Payments.  On or before the first day of each calendar month
      hereafter  the Company shall pay to Laurus (x) two percent (2.0%) of
      all gross receipts of the Company or any of its Subsidiaries arising from sales,
      licenses or royalty payments of any kind from any municipal, city, state or
      federal entity (each, a “Governmental Body”) actually received by the Company or
      any of its Subsidiaries within the previous calendar month; and (y) twelve
      percent (12.0%) of all gross receipts of the Company or any of its Subsidiaries
      arising from sales, licenses or royalty payments of any kind (the “12% Royalty”)
      from any entity that is not a Governmental Body  actually received by
      the Company or any of its Subsidiaries within the previous calendar month
      provided, however that solely with respect to gross receipts arising from sales
      of the Company’s BioSentry product to any entity that is not a Governmental
      Body, the 12.0% Royalty shall be reduced to 7%. Failure to make each of the
      payments required by Section 6.12(i)(x) and 6.12(i)(y)  shall
      constitute and Event of Default under the Note.

     

    6.22           Approval
      of Increase in Authorized Shares.    On or before March 5,
      2008, the Company shall have increased its authorized Common Stock to no less
      than 300,000,000 shares. Failure to increase its authorized shares to at least
      300,000,000 shares on or before such date shall constitute an Event of Default
      under the Note.

     

    
      
        
        

      

      
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    7.           Covenants
      of the Purchaser.  The Purchaser covenants and agrees with the
      Company as follows:

     

    7.1           Confidentiality.  The
      Purchaser will not disclose, and will not include in any public announcement,
      the name of the Company, unless expressly agreed to by the Company or unless
      and
      until such disclosure is required by law or applicable regulation, and then
      only
      to the extent of such requirement.

     

    7.2           Non-Public
      Information.  The Purchaser will not effect any sales in the
      shares of the Company’s Common Stock while in possession of material, non-public
      information regarding the Company if such sales would violate applicable
      securities law.

     

    7.3           Limitation
      on Acquisition of Common Stock of the Company.  Notwithstanding
      anything to the contrary contained in this Agreement, any Related Agreement
      or
      any document, instrument or agreement entered into in connection with any other
      transactions between the Purchaser and the Company, the Purchaser may not
      acquire stock in the Company (including, without limitation, pursuant to a
      contract to purchase, by exercising an option or warrant, by converting any
      other security or instrument, by acquiring or exercising any other right to
      acquire, shares of stock or other security convertible into shares of stock
      in
      the Company, or otherwise, and such contracts, options, warrants, conversion
      or
      other rights shall not be enforceable or exercisable) to the extent such stock
      acquisition would cause any interest (including any original issue discount)
      payable by the Company to the Purchaser not to qualify as “portfolio interest”
within the meaning of Section 881(c)(2) of the Code, by reason of
      Section 881(c)(3) of the Code, taking into account the constructive
      ownership rules under Section 871(h)(3)(C) of the Code (the “Stock Acquisition
      Limitation”).  The Stock Acquisition Limitation shall automatically
      become null and void without any notice to the Company upon the earlier to
      occur
      of either (a) the Company’s delivery to the Purchaser of a Notice of Redemption
      (as defined in the Note) or (b) the existence of an Event of Default (as defined
      in the Note) at a time when the average closing price of the Company’s common
      stock as reported by Bloomberg, L.P. on the Principal Market for the immediately
      preceding five trading days is greater than or equal to 150% of the Exercise
      Price (as defined in the Warrants).

     

    8.           Covenants
      of the Company and the Purchaser Regarding Indemnification.

     

    8.1           Company
      Indemnification.  The Company agrees to indemnify, hold harmless,
      reimburse and defend the Purchaser, each of the Purchaser’s officers, directors,
      agents, affiliates, control persons, and principal shareholders, against all
      claims, costs, expenses, liabilities, obligations, losses or damages (including
      reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser
      which result, arise out of or are based upon: (i) any misrepresentation by
      the
      Company or any of its Subsidiaries or breach of any warranty by the Company
      or
      any of its Subsidiaries in this Agreement, any other Related Agreement or in
      any
      exhibits or schedules attached hereto or thereto; or (ii) any breach or default
      in performance by Company or any of its Subsidiaries of any covenant or
      undertaking to be performed by Company or any of its Subsidiaries hereunder,
      under any other Related Agreement or any other agreement entered into by the
      Company and/or any of its Subsidiaries and the Purchaser relating hereto or
      thereto.

     

    
      
        
        

      

      
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    8.2           Purchaser’s
      Indemnification.  The Purchaser agrees to indemnify, hold
      harmless, reimburse and defend the Company and each of the Company’s officers,
      directors, agents, affiliates, control persons and principal shareholders,
      at
      all times against any claims, costs, expenses, liabilities, obligations, losses
      or damages (including reasonable legal fees) of any nature, incurred by or
      imposed upon the Company which result, arise out of or are based
      upon:  (i) any misrepresentation by the Purchaser or breach of any
      warranty by the Purchaser in this Agreement or in any exhibits or schedules
      attached hereto or any Related Agreement; or (ii) any breach or default in
      performance by the Purchaser of any covenant or undertaking to be performed
      by
      the Purchaser hereunder, or any other agreement entered into by the Company
      and
      the Purchaser relating hereto.

     

    9.           Exercise
      of the Warrants.

     

    9.1           Mechanics
      of Exercise.

     

    (a)           Provided
      the Purchaser has notified the Company of the Purchaser’s intention to sell the
      Warrant Shares and the Warrant Shares are included in an effective registration
      statement or are otherwise exempt from registration when sold:  (i)
      upon the exercise of the Warrants or part thereof, the Company shall, at its
      own
      cost and expense, take all necessary action (including the issuance of an
      opinion of counsel reasonably acceptable to the Purchaser following a request
      by
      the Purchaser) to assure that the Company’s transfer agent shall issue shares of
      the Company’s Common Stock in the name of the Purchaser (or its nominee) or such
      other persons as designated by the Purchaser in accordance with Section 9.1(b)
      hereof and in such denominations to be specified representing the number of
      Warrant Shares issuable upon such exercise; and (ii) the Company warrants
      that no instructions other than these instructions have been or will be given
      to
      the transfer agent of the Company’s Common Stock and that after the
      effectiveness date of a registration statement filed pursuant to the Securities
      Act the Warrant Shares issued will be freely transferable subject to the
      prospectus delivery requirements of the Securities Act and the provisions of
      this Agreement, and will not contain a legend restricting the resale or
      transferability of the Warrant Shares.

     

    (b)           The
      Purchaser will give notice of its decision to exercise its right to exercise
      the
      Warrants or part thereof by faxing or otherwise delivering an executed and
      completed notice of the number of shares to be subscribed to the Company (the
      “Form of Subscription”).  The Purchaser will not be required to
      surrender the Warrants until the Purchaser receives a credit to the account
      of
      the Purchaser’s prime broker through the DWAC system (as defined below),
      representing the Warrant Shares or until the Warrants have been fully
      exercised.  Each date on which a Form of Subscription is faxed or
      delivered to the Company in accordance with the provisions hereof shall be
      deemed a “Exercise Date.”  Pursuant to the terms of the Form of
      Subscription, the Company will issue instructions to the transfer agent
      accompanied by an opinion of counsel within one (1) business day of the date
      of
      the delivery to the Company of the  Form of Subscription and shall
      cause the transfer agent to transmit the certificates representing the Warrant
      Shares set forth in the applicable Form of Subscription to the Holder by
      crediting the account of the Purchaser’s prime broker with the Depository Trust
      Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system
      within three (3) business days after receipt by the Company of the Form of
      Subscription (the “Delivery Date”).

     

    
      
        
        

      

      
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    (c)           The
      Company understands that a delay in the delivery of the Warrant Shares in the
      form required pursuant to Section 9 hereof beyond the Delivery Date could result
      in economic loss to the Purchaser.  In the event that the Company
      fails to direct its transfer agent to deliver the Warrant Shares to the
      Purchaser via the DWAC system within the time frame set forth in Section 9.1(b)
      above and the Warrant Shares are not delivered to the Purchaser by the Delivery
      Date, as compensation to the Purchaser for such loss, the Company agrees to
      pay
      late payments to the Purchaser for late issuance of the Warrant Shares in the
      form required pursuant to Section 9 hereof upon exercise of the Warrant in
      the
      amount equal to the greater of:  (i) $500 per business day after the
      Delivery Date; or (ii) the Purchaser’s actual damages from such delayed
      delivery.  The Company shall pay any payments incurred under this
      Section in immediately available funds upon demand and, in the case of actual
      damages, accompanied by reasonable documentation of the amount of such
      damages.  Such documentation shall show the number of shares of Common
      Stock the Purchaser is forced to purchase (in an open market transaction) which
      the Purchaser anticipated receiving upon such exercise, and shall be calculated
      as the amount by which (A) the Purchaser’s total purchase price (including
      customary brokerage commissions, if any) for the shares of Common Stock so
      purchased exceeds (B) the aggregate amount of the Exercise Price for the
      Warrants, for which such Form of Subscription was not timely
      honored.

     

    10.           Offering
      Restrictions.  Except as previously disclosed in the SEC Reports
      or in the Exchange Act Filings, or stock or stock options granted to employees
      or directors of the Company (these exceptions hereinafter referred to as the
      “Excepted Issuances”), neither the Company nor any of its Subsidiaries will,
      prior to the full repayment of the Note (together with all accrued and unpaid
      interest and fees related thereto), (x) enter into any equity line of credit
      agreement or similar agreement or (y) issue, or enter into any agreement to
      issue, any securities with a variable/floating conversion and/or pricing feature
      which are or could be (by conversion or registration) free-trading securities
      (i.e.  common stock subject to a registration statement).

     

    11.           Miscellaneous.

     

    11.1           Governing
      Law, Jurisdiction and Waiver of Jury Trial.

     

    (a)           THIS
      AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
      AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
      TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAWS.

     

    
      
        
        

      

      
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    (b)           THE
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
      AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
      THE
      RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
      OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND
      THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
      BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
      FURTHERPROVIDED, THAT, NOTHING IN THIS AGREEMENT SHALL BE
      DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER
      LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE
      ON
      THE COLLATERAL (AS DEFINED IN THE PLEDGE AND SECURITY AGREEMENT AND THE SECURITY
      AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE PLEDGE
      AND SECURITY AGREEMENT AND THE SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT
      OR
      OTHER COURT ORDER IN FAVOR OF THE PURCHASER.  THE COMPANY EXPRESSLY
      SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
      COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT
      IT
      MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.  THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
      IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
      EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
      IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

     

    (c)           THE
      PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
      BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE
      ALL
      RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
      ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
      PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
      INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
      THIS
      AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
      THERETO.

     

    11.2           Severability.  Wherever
      possible each provision of this Agreement and the Related Agreements shall
      be
      interpreted in such manner as to be effective and valid under applicable law,
      but if any provision of this Agreement or any Related Agreement shall be
      prohibited by or invalid or illegal under applicable law such provision shall
      be
      ineffective to the extent of such prohibition or invalidity or illegality,
      without invalidating the remainder of such provision or the remaining provisions
      thereof which shall not in any way be affected or impaired thereby.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    11.3           Survival.  The
      representations, warranties, covenants and agreements made herein shall survive
      any investigation made by the Purchaser and the closing of the transactions
      contemplated hereby to the extent provided therein.  All statements as
      to factual matters contained in any certificate or other instrument delivered
      by
      or on behalf of the Company pursuant hereto in connection with the transactions
      contemplated hereby shall be deemed to be representations and warranties by
      the
      Company hereunder solely as of the date of such certificate or
      instrument.  All indemnities set forth herein shall survive the
      execution, delivery and termination of this Agreement and the Note and the
      making and repayment of the obligations arising hereunder, under the Note and
      under the other Related Agreements.

     

    11.4           Successors.  Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the successors, heirs, executors and
      administrators of the parties hereto and shall inure to the benefit of and
      be
      enforceable by each person or entity which shall be a holder of the Securities
      from time to time, other than the holders of Common Stock which has been sold
      by
      the Purchaser pursuant to Rule 144 or an effective registration
      statement.  The Purchaser may assign any or all of its rights
      hereunder or under any Related Agreement to any person and any such assignee
      shall succeed to the Purchaser’s rights with respect thereto; provided that the
      Purchaser shall not be permitted to effect any such assignment to a competitor
      of any Company unless an Event of Default (as defined in the Note) has occurred
      and is continuing.  Upon such assignment, the Purchaser shall be
      released from all responsibility for the Collateral (as defined in the Master
      Security Agreement, the Stock Pledge Agreement and each other security
      agreement, mortgage, cash collateral deposit letter, pledge and other agreements
      which are executed by the Company or any of its Subsidiaries in favor of the
      Purchaser) to the extent same is assigned to any transferee.  The
      Purchaser may from time to time sell or otherwise grant participations in any
      of
      the Obligations (as defined in the Master Security Agreement) and the holder
      of
      any such participation shall, subject to the terms of any agreement between
      the
      Purchaser and such holder, be entitled to the same benefits as the Purchaser
      with respect to any security for the Obligations (as defined in the Master
      Security Agreement) in which such holder is a participant.  The
      Company agrees that each such holder may exercise any and all rights of banker's
      lien, set-off and counterclaim with respect to its participation in the
      Obligations (as defined in the Master Security Agreement) as fully as though
      the
      Company were directly indebted to such holder in the amount of such
      participation.  The Company may not assign any of its rights or
      obligations hereunder without the prior written consent of the
      Purchaser.  All of the terms, conditions, promises, covenants,
      provisions and warranties of this Agreement shall inure to the benefit of each
      of the undersigned, and shall bind the representatives, successors and permitted
      assigns of the Company.

     

    11.5           Entire
      Agreement; Maximum Interest.  This Agreement, the Related
      Agreements, the exhibits and schedules hereto and thereto and the other
      documents delivered pursuant hereto constitute the full and entire understanding
      and agreement between the parties with regard to the subjects hereof and no
      party shall be liable or bound to any other in any manner by any
      representations, warranties, covenants and agreements except as specifically
      set
      forth herein and therein.  Nothing contained in this Agreement, any
      Related Agreement or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum rate permitted by
      applicable law.  In the event that the rate of interest or dividends
      required to be paid or other charges hereunder exceed the maximum rate permitted
      by such law, any payments in excess of such maximum shall be credited against
      amounts owed by the Company to the Purchaser and thus refunded to the
      Company.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    11.6           Amendment
      and Waiver.

     

    (a)           This
      Agreement may be amended or modified only upon the written consent of the
      Company and the Purchaser.

     

    (b)           The
      obligations of the Company and the rights of the Purchaser under this Agreement
      may be waived only with the written consent of the Purchaser.

     

    (c)           The
      obligations of the Purchaser and the rights of the Company under this Agreement
      may be waived only with the written consent of the Company.

     

    11.7           Delays
      or Omissions.  It is agreed that no delay or omission to exercise
      any right, power or remedy accruing to any party, upon any breach, default
      or
      noncompliance by another party under this Agreement or the Related Agreements,
      shall impair any such right, power or remedy, nor shall it be construed to
      be a
      waiver of any such breach, default or noncompliance, or any acquiescence
      therein, or of or in any similar breach, default or noncompliance thereafter
      occurring.  All remedies, either under this Agreement or the Related
      Agreements, by law or otherwise afforded to any party, shall be cumulative
      and
      not alternative.

     

    11.8           Notices.  All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given:

     

    (a)           upon
      personal delivery to the party to be notified;

     

    (b)           when
      sent by confirmed facsimile if sent during normal business hours of the
      recipient, if not, then on the next business day;

     

    (c)           three
      (3) business days after having been sent by registered or certified mail, return
      receipt requested, postage prepaid; or

     

    (d)           one
      (1) day after deposit with a nationally recognized overnight courier, specifying
      next day delivery, with written verification of receipt.

     

    All
      communications shall be sent as follows:

     

    
      	 	
              If
                to the Company, to:

            	
              JMAR
                Technologies, Inc.

              10905
                Technology Place

              San
                Diego, CA 92127

              Attention:     Chief
                Financial Officer

              Facsimile:      858-946-6879

            

    

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    
      	 	
              If
                to the Purchaser, to:

            	
              Laurus
                Master Fund, Ltd.

              c/o
                M&C Corporate Services Limited

              P.O.  Box
                309 GT

              Ugland
                House

              George
                Town

              South
                Church Street

              Grand
                Cayman, Cayman Islands

              Facsimile:   345-949-8080

            
	 	 	 
	 	 	
              with
                a copy to:

            
	 	 	 
	 	 	
              Portfolio
                Services

              Laurus
                Capital Management, LLC

              335
                Madison Avenue, 10th Floor

              New
                York, NY 10017

              Facsimile:   212-581-5037

            

    

     

    or
      at
      such other address as the Company or the Purchaser may designate by written
      notice to the other parties hereto given in accordance herewith.

     

    11.9           Attorneys’
      Fees.  In the event that any suit or action is instituted to
      enforce any provision in this Agreement or any Related Agreement, the prevailing
      party in such dispute shall be entitled to recover from the losing party all
      fees, costs and expenses of enforcing any right of such prevailing party under
      or with respect to this Agreement and/or such Related Agreement, including,
      without limitation, such reasonable fees and expenses of attorneys and
      accountants, which shall include, without limitation, all fees, costs and
      expenses of appeals.

     

    11.10        Titles
      and Subtitles.  The titles of the sections and subsections of this
      Agreement are for convenience of reference only and are not to be considered
      in
      construing this Agreement.

     

    11.11         Facsimile
      Signatures; Counterparts.  This Agreement may be executed by
      facsimile signatures and in any number of counterparts, each of which shall
      be
      an original, but all of which together shall constitute one
      agreement.

     

    11.12         Broker’s
      Fees.  Except as set forth on Schedule 11.12 hereof, each party
      hereto represents and warrants that no agent, broker, investment banker, person
      or firm acting on behalf of or under the authority of such party hereto is
      or
      will be entitled to any broker’s or finder’s fee or any other commission
      directly or indirectly in connection with the transactions contemplated
      herein.  Each party hereto further agrees to indemnify each other
      party for any claims, losses or expenses incurred by such other party as a
      result of the representation in this Section 11.12 being untrue.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    11.13         Construction.  Each
      party acknowledges that its legal counsel participated in the preparation of
      this Agreement and the Related Agreements and, therefore, stipulates that the
      rule of construction that ambiguities are to be resolved against the drafting
      party shall not be applied in the interpretation of this Agreement or any
      Related Agreement to favor any party against the other.

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
      AGREEMENT as of the date set forth in the first paragraph hereof.

     

    
      	
              COMPANY:

            	
              PURCHASER:

            
	 	 
	
              JMAR
                TECHNOLOGIES, INC.

            	
              LAURUS
                MASTER FUND, LTD.

            
	 	 
	
              By:  /s/
                C. NEIL BEER

            	
              By:  /s/
                EUGENE GRIN

            
	
              Name:  C.
                Neil Beer

            	
              Name:  Eugene
                Grin

            
	
              Title:  Chief
                Executive Officer

            	
              Title:  Director

            

    

    

     

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    FORM
      OF SECURED TERM NOTE

     

    

    

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    FORM
      OF WARRANT

     

    

    

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

     

    FUNDS
      ESCROW AGREEMENT

     

     

     

     

    C-1jmar_10q-ex1009.htm

    EXHIBIT
      10.9

     

    SECURED
      TERM NOTE

     

    FOR
      VALUE
      RECEIVED, JMAR TECHNOLOGIES, INC., a Delaware corporation (the
“Company”), promises to pay to LAURUS MASTER FUND, LTD., c/o
      M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church
      Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the
“Holder”) or its registered assigns or successors in interest,
      the sum of Seven Million Five Hundred  Thousand Dollars ($7,500,000),
      together with any accrued and unpaid interest hereon, on August  31,
      2009 (the “Maturity Date”) if not sooner indefeasibly paid in
      full.  The original principal amount of this Secured Term Note is
      hereinafter referred to as the “Principal Amount”.

     

    Capitalized
      terms used herein without definition shall have the meanings ascribed to such
      terms in that certain Securities Purchase Agreement dated as of the date hereof
      between the Company and the Holder (as amended, modified and/or supplemented
      from time to time, the “Purchase Agreement”).

     

    The
      Principal Amount of this Secured Term Note that is contained in the Restricted
      Account (as defined in the Restricted Account Agreement referred to in the
      Purchase Agreement) on the date of the issuance of this Secured Term Note is
      $6,420,600.61.

     

    The
      following terms shall apply to this Secured Term Note (this
“Note”):

     

    ARTICLE
      I

    CONTRACT
      RATE

     

    1.1           Contract
      Rate.  Subject to Sections 3.2 and 4.10, interest payable on the
      outstanding Principal Amount of this Note shall accrue at a rate per annum
      equal
      to the “prime rate” published in The Wall Street Journal from time to
      time (the “Prime Rate”), plus two percent (2.0%) (the
“Contract Rate”).  The Contract Rate shall be
      increased or decreased as the case may be for each increase or decrease in
      the
      Prime Rate in an amount equal to such increase or decrease in the Prime Rate;
      each change to be effective as of the day of the change in the Prime
      Rate.  The Contract Rate shall not at any time be less than Ten and
      one quarter percent  (10.25%).  Interest shall be calculated
      on the basis of a 360 day year.  Interest shall be payable monthly, in
      arrears, commencing on October  1, 2007, on the first business day of
      each consecutive calendar month thereafter through and including the Maturity
      Date, and on the Maturity Date, whether by acceleration or
      otherwise.

     

    1.2           Contract
      Rate Payments.  The Contract Rate shall be calculated on the last
      business day of each calendar month hereafter (other than for increases or
      decreases in the Prime Rate which shall be calculated and become effective
      in
      accordance with the terms of Section 1.1) until the Maturity Date and shall
      be
      subject to adjustment as set forth herein.

     

    1.3           Principal
      Payments.  Any outstanding Principal Amount together with any
      accrued and unpaid interest and any and all other unpaid amounts which are
      then
      owing by the Company to the Holder under this Note, the Purchase Agreement
      and/or any other Related Agreement shall be due and payable on the Maturity
      Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      II

    [INTENTIONALLY
      OMITTED]

     

    ARTICLE
      III

    EVENTS
      OF DEFAULT

     

    3.1           Events
      of Default.  The occurrence of any of the following events set
      forth in this Section 3.1 shall constitute an event of default (“Event
      of Default”) hereunder:

     

    (a)           Failure
      to Pay.  The Company fails to pay when due any installment of
      principal, interest or other fees hereon in accordance herewith, or the Company
      fails to pay any of the other Obligations (under and as defined in the Pledge
      and Security Agreement and the Security Agreement, as such terms are defined
      in
      the Reaffirmation Agreement) when due, and, in any such case, such failure
      shall
      continue for a period of three (3) days following the date upon which any such
      payment was due.

     

    (b)           Breach
      of Covenant.  The Company or any of its Subsidiaries breaches any
      covenant or any other term or condition of this Note in any material respect
      and
      such breach, if subject to cure, continues for a period of fifteen (15) days
      after the occurrence thereof.

     

    (c)           Breach
      of Representations and Warranties.  Any representation, warranty
      or statement made or furnished by the Company or any of its Subsidiaries in
      this
      Note, the Purchase Agreement or any other Related Agreement shall at any time
      be
      false or misleading in any material respect on the date as of which made or
      deemed made.

     

    (d)           Default
      Under Other Agreements.  The occurrence of any default (or similar
      term) in the observance or performance of any other agreement or condition
      relating to any indebtedness or contingent obligation of the Company or any
      of
      its Subsidiaries beyond the period of grace (if any), the effect of which
      default is to cause, or permit the holder or holders of such indebtedness or
      beneficiary or beneficiaries of such contingent obligation to cause, such
      indebtedness to become due prior to its stated maturity or such contingent
      obligation to become payable;

     

    (e)           Material
      Adverse Effect.  Any change or the occurrence of any event which
      could reasonably be expected to have a Material Adverse Effect;

     

    (f)           Bankruptcy.  The
      Company or any of its Subsidiaries shall (i) apply for, consent to or
      suffer to exist the appointment of, or the taking of possession by, a receiver,
      custodian, trustee or liquidator of itself or of all or a substantial part
      of
      its property, (ii) make a general assignment for the benefit of creditors,
      (iii) commence a voluntary case under the federal bankruptcy laws (as now or
      hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file
      a
      petition seeking to take advantage of any other law providing for the relief
      of
      debtors, (vi) acquiesce to, without challenge within ten (10) days of the filing
      thereof, or failure to have dismissed, within thirty (30) days, any petition
      filed against it in any involuntary case under such bankruptcy laws, or (vii)
      take any action for the purpose of effecting any of the foregoing;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (g)           Judgments.  Except
      with regard to JSI Microelectronics, Inc., attachments or levies in excess
      of
      $50,000 in the aggregate are made upon the Company or any of its Subsidiary’s
      assets or a judgment is rendered against the Company’s property involving a
      liability of more than $50,000 which shall not have been vacated, discharged,
      stayed or bonded within thirty (30) days from the entry thereof;

     

    (h)           Change
      of Control.  A Change of Control (as defined below) shall occur
      with respect to the Company, unless Holder shall have expressly consented to
      such Change of Control in writing.  A “Change of Control” shall mean
      any event or circumstance as a result of which (i) any “Person” or “group” (as
      such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as
      in
      effect on the date hereof), other than the Holder, is or becomes the “beneficial
      owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
      directly or indirectly, of 35% or more on a fully diluted basis of the then
      outstanding voting equity interest of the any Company, (ii) the Board of
      Directors of the Company shall cease to consist of a majority of the Company’s
      board of directors on the date hereof (or directors appointed by a majority
      of
      the board of directors in effect immediately prior to such appointment) or
      (iii)
      the Company or any of its Subsidiaries merges or consolidates with, or sells
      all
      or substantially all of its assets to, any other person or entity;

     

    (i)           Indictment;
      Proceedings.  The indictment or threatened indictment of the
      Company or any of its Subsidiaries or any executive officer of the Company
      or
      any of its Subsidiaries under any criminal statute, or commencement or
      threatened commencement of criminal or civil proceeding against the Company
      or
      any of its Subsidiaries or any executive officer of the Company or any of its
      Subsidiaries pursuant to which statute or proceeding penalties or remedies
      sought or available include forfeiture of any of the property of the Company
      or
      any of its Subsidiaries;

     

    (j)           The
      Purchase Agreement and Related Agreements.  (i) An Event of
      Default shall occur under and as defined in the Purchase Agreement or any other
      Related Agreement, (ii) the Company or any of its Subsidiaries shall breach
      any
      term or provision of the Purchase Agreement or any other Related Agreement
      in
      any material respect and such breach, if capable of cure, continues unremedied
      for a period of fifteen (15) days after the occurrence thereof, (iii) the
      Company or any of its Subsidiaries attempts to terminate, challenges the
      validity of, or its liability under, the Purchase Agreement or any Related
      Agreement, (iv) any proceeding shall be brought to challenge the validity,
      binding effect of the Purchase Agreement or any Related Agreement or (v) the
      Purchase Agreement or any Related Agreement ceases to be a valid, binding and
      enforceable obligation of the Company or any of its Subsidiaries (to the extent
      such persons or entities are a party thereto);

     

    3.2           Default
      Interest.  Following the occurrence and during the continuance of
      an Event of Default, the Company shall pay additional interest on the
      outstanding principal balance of this Note in an amount equal to one percent
      (1.0%) per month, and all outstanding obligations under this Note, the Purchase
      Agreement and each other Related Agreement, including unpaid interest, shall
      continue to accrue interest at such additional interest rate from the date
      of
      such Event of Default until the date such Event of Default is cured or
      waived.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    3.3           Default
      Payment.  Following the occurrence and during the continuance of
      an Event of Default, the Holder, at its option, may demand repayment in full
      of
      all obligations and liabilities owing by the Company to the Holder under this
      Note, the Purchase Agreement and/or any other Related Agreement or may elect,
      in
      addition to all rights and remedies of the Holder under the Purchase Agreement
      and the other Related Agreements and/or all obligations and liabilities of
      the
      Company under the Purchase Agreement and the other Related Agreements, to
      require the Company to make a Default Payment (“Default
      Payment”).  The Default Payment shall be one hundred thirty
      percent (130%) of the outstanding principal amount of the Note, plus accrued
      but
      unpaid interest, all other fees then remaining unpaid, and all other amounts
      payable hereunder.  The Default Payment shall be applied first to any
      fees due and payable to the Holder pursuant to this Note, the Purchase
      Agreement, and/or the other Related Agreements, then to accrued and unpaid
      interest due on this Note and then to the outstanding principal balance of
      this
      Note.  The Default Payment shall be due and payable immediately on the
      date that the Holder has demanded payment of the Default Payment pursuant to
      this Section 3.3.

     

    ARTICLE
      IV

    MISCELLANEOUS

     

    4.1           Issuance
      of New Note.  Upon any partial redemption of this Note, a new Note
      containing the same date and provisions of this Note shall, at the request
      of
      the Holder, be issued by the Company to the Holder for the principal balance
      of
      this Note and interest which shall not have been paid as of such
      date.  Subject to the provisions of Article III of this Note, the
      Company shall not pay any costs, fees or any other consideration to the Holder
      for the production and issuance of a new Note.

     

    4.2           Cumulative
      Remedies.  The remedies under this Note shall be
      cumulative.

     

    4.3           Failure
      or Indulgence Not Waiver.  No failure or delay on the part of the
      Holder hereof in the exercise of any power, right or privilege hereunder shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      such power, right or privilege preclude other or further exercise thereof or
      of
      any other right, power or privilege.  All rights and remedies existing
      hereunder are cumulative to, and not exclusive of, any rights or remedies
      otherwise available.

     

    4.4           Notices.  Any
      notice herein required or permitted to be given shall be in writing and shall
      be
      deemed effectively given: (a) upon personal delivery to the party notified,
      (b)
      when sent by confirmed telex or facsimile if sent during normal business hours
      of the recipient, if not, then on the next business day, (c) five days after
      having been sent by registered or certified mail, return receipt requested,
      postage prepaid, or (d) one day after deposit with a nationally recognized
      overnight courier, specifying next day delivery, with written verification
      of
      receipt.  All communications shall be sent to the Company at the
      address provided in the Purchase Agreement executed in connection herewith,
      and
      to the Holder at the address provided in the Purchase Agreement for the Holder,
      with a copy to Laurus Capital Management, LLC, Attn: Portfolio Services, 335
      Madison Avenue, 10th Floor,
      New York,
      New York 10017, facsimile number (212) 581-5037, or at such other address as
      the
      Company or the Holder may designate by ten days advance written notice to the
      other parties hereto.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    4.5           Amendment
      Provision.  The term “Note” and all references thereto, as used
      throughout this instrument, shall mean this instrument as originally executed,
      or if later amended or supplemented, then as so amended or supplemented, and
      any
      successor instrument as such successor instrument may be amended or
      supplemented.

     

    4.6           Assignability.  This
      Note shall be binding upon the Company and its successors and assigns, and
      shall
      inure to the benefit of the Holder and its successors and assigns, and may
      be
      assigned by the Holder in accordance with the requirements of the Purchase
      Agreement.  The Company may not assign any of its obligations under
      this Note without the prior written consent of the Holder, any such purported
      assignment without such consent being null and void.

     

    4.7           Cost
      of Collection.  In case of any Event of Default under this Note,
      the Company shall pay the Holder the Holder’s reasonable costs of collection,
      including reasonable attorneys’ fees.

     

    4.8           Governing
      Law, Jurisdiction and Waiver of Jury Trial.

     

    (a)           THIS
      NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
      LAWS
      OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAW.

     

    (b)           THE
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
      AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
      RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE
      OR
      ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES
      THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
      OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHERPROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
      OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
      IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
      COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
      OR OTHER COURT ORDER IN FAVOR OF THE HOLDER.  THE COMPANY EXPRESSLY
      SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
      COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH
      IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.  THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
      IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
      UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
      DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (c)           THE
      COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
      BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES
      ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
      RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
      THE
      HOLDER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
      TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE,
      ANY
      OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
      THERETO.

     

    4.9           Severability.  In
      the event that any provision of this Note is invalid or unenforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law.  Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of this
      Note.

     

    4.10           Maximum
      Payments.  Nothing contained herein shall be deemed to establish
      or require the payment of a rate of interest or other charges in excess of
      the
      maximum permitted by applicable law.  In the event that the rate of
      interest required to be paid or other charges hereunder exceed the maximum
      rate
      permitted by such law, any payments in excess of such maximum rate shall be
      credited against amounts owed by the Company to the Holder and thus refunded
      to
      the Company.

     

    4.11           Security
      Interest and Guarantee.  The Holder has been granted a security
      interest in certain assets of the Company and its Subsidiaries as more fully
      described in the Reaffirmation Agreement dated as of the date
      hereof.  The obligations of the Company under this Note are guaranteed
      by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty
      dated
      as of the date hereof.

     

    4.12           Construction.  Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against the
      other.

     

    4.13           Registered
      Obligation. This Note is intended to be a registered obligation within the
      meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (or
      its
      agent) shall register this Note (and thereafter shall maintain such
      registration) as to both principal and any stated
      interest.  Notwithstanding any document, instrument or agreement
      relating to this Note to the contrary, transfer of this Note (or the right
      to
      any payments of principal or stated interest thereunder) may only be effected
      by
      (i) surrender of this Note and either the reissuance by the Company of this
      Note
      to the new holder or the issuance by the Company of a new instrument to the
      new
      holder, or (ii) transfer through a book entry system maintained by the Company
      (or its agent), within the meaning of Treasury Regulation Section
      1.871-14(c)(1)(i)(B).

     

    [Balance
      of page intentionally left blank; signature page follows]

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Secured Term Note to be
      signed in its name effective as of this 31st day of August, 2007.

     

    JMAR
      TECHNOLOGIES, INC.

     

    By:
      /s/
      C. NEIL BEER

    Name:  C.
      Neil
      Beer

    Title:  Chief
      Executive
      Officer

     

    WITNESS:

    

     

    __________________________________

     

    

    
7

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