Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of April 11, 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 Hundred Fifty Thousand Dollars ($750,000) 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 a warrant in the form of Exhibit B hereto (as amended,
modified and/or supplemented from time to time, the “Warrant”) to purchase up to 7,597,750 shares of the Company’s
Common Stock (subject to adjustment as set forth therein) in connection with the Purchaser’s purchase of the Note;

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

WHEREAS, the Company desires to issue and sell the Note and Warrant 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 Warrant and Common Stock issuable
upon exercise of the Warrant are referred to as the “Securities.”

2. Fees and Warrant. On the Closing Date:

(a) The Company will issue and deliver to the Purchaser the Warrant to purchase up to 7,597,750 shares of
Common Stock (subject to adjustment as set forth therein) 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 Warrant and shares of the Company’s Common Stock issuable upon
exercise of the Warrant (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 three and one half percent (3.50%) of the aggregate
principal amount of the Note. 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 Warrant 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 $750,000 of the proceeds of the Note shall be placed in the Restricted Account (as defined in the
Restricted Account Agreement referred to below)). 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

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 Warrant to be issued in connection with this Agreement, (iii) the Reaffirmation 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 Registration Rights Agreement relating
to the Securities dated as of the date hereof between the Company and the Purchaser (as amended, modified and/or
supplemented from time to time, the “Registration Rights Agreement”), (v) the Subsidiary Guaranty dated as of the date
hereof made by certain Subsidiaries of the Company (as amended, modified and/or supplemented from time to time, the

 

2

 

 

“Subsidiary Guaranty”), (vi) 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 D hereto (as amended, modified
and/or supplemented from time to time, the “Escrow Agreement”), (vii) 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”), (viii) 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 (x) all other documents, instruments and agreements entered
into in connection with the transactions contemplated hereby and thereby (the preceding clauses (ii) through (x),
collectively, the “Related Agreements”); (2) issue and sell the Note; (3) issue and sell the Warrant 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.

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, 41,918,619 shares of which
are issued and outstanding, and 5,000,000 are shares of preferred stock, par value $0.01 per share of
which 785,000 shares of preferred stock are issued and outstanding. The authorized, issued and
outstanding capital stock of each Subsidiary of the Company is set forth on Schedule 4.3.

(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

 

3

 

 

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
Warrant, 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”). 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. 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:

(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 Warrant and the subsequent exercise of the Warrant 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

 

 

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 December 31, 2006 (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.

(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”).

 

5

 

 

(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) There is no weakness in any of the Company’s Disclosure Controls or Financial Reporting Controls that
is required to be disclosed in any of the Exchange Act Filings, except as so disclosed.

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

 

6

 

 

(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;

(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;

 
 
7

 

 

(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.

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.

 

8

 

 

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 therefor.

(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.

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

 

9

 

 

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.

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

 
 
10

 

 

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.

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

 
 
11

 

 

(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.

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.

 

12

 

 

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 Warrant is binding upon the Company and enforceable regardless of the dilution such issuance
may have on the ownership interests of other shareholders of the Company.

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

 

13

 

 

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 the Internal 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.

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.

 

14

 

 

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 Warrant to be purchased by it
under this Agreement and the Warrant Shares acquired by it upon the exercise of the Warrant, 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 Warrant 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.

5.5 Acquisition for Own Account. The Purchaser is acquiring the Note and Warrant 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 Warrant 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.

 

15

 

 

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 Warrant 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.”

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 Warrant 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.

 

16

 

 

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;

(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;

 

17

 

 

(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 Warrant for general
working capital purposes only (it being understood that $750,000 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).

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;

 

18

 

 

(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.

 

19

 

 

(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:

(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 manditorily 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) Except with regard to JSI Microelectronics, Inc., 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;

 
 
20

 

 

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

(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); and

(II) The Company, without the prior written consent of the Purchaser, shall not, and shall not permit any of its
Subsidiaries to, 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.

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.

 

21

 

 

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 Warrant.

6.15 Margin Stock. The Company will not permit any of the proceeds of the Note or the Warrant 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.

6.18 Authorization and Reservation of Shares. 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.

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.

 

22

 

 

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 Warrant).

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.

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.

 

23

 

 

9. Exercise of the Warrant.

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 Warrant 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 (as defined in the Registration Rights
Agreement) 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 Warrant or part
thereof by telecopying 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
Warrant 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 Warrant has been fully exercised.
Each date on which a Form of Subscription is telecopied 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”).

(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

 

24

 

 

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. Registration Rights.

10.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser pursuant
to the Registration Rights Agreement.

10.2 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.

(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
FURTHER PROVIDED,

 

25

 

 

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.

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

 

26

 

 

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 shall not be permitted to assign its rights hereunder or under any
Related Agreement to a competitor of the Company unless an Event of Default (as defined in the Note) has occurred and
is continuing.

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.

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.

 
 
27

 

 

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
	 	 	 	 	 
	 	 	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.

 

28

 

 

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.

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

 

29

 

 

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

 

30

 

 

EXHIBIT A

FORM OF SECURED TERM NOTE

 

A-1

 

 

EXHIBIT B

FORM OF WARRANT

 

B-1

 

 

EXHIBIT C

 

D-1Filed by Bowne Pure Compliance

 

Exhibit 10.2

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 Hundred Fifty Thousand Dollars ($750,000), together
with any accrued and unpaid interest hereon, on April 11, 2008 (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 $250,000.

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. Interest shall be calculated on the basis of a 360 day year.
Interest shall be payable monthly, in arrears, commencing on May 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.

1

 

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 FURTHER
PROVIDED, 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).

6

 

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

7

 

IN WITNESS
WHEREOF, the Company has caused this Secured Term Note to be signed in its
name effective as of this 11th day of April, 2007.

JMAR
TECHNOLOGIES, INC. 
By: /s/ C. NEIL
BEER                                  

      Name: C. Neil Beer 
      Title: Chief Executive Officer

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}]]