THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO JMAR TECHNOLOGIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECURED NON-CONVERTIBLE REVOLVING NOTE
FOR
VALUE RECEIVED, each of JMAR Technologies, Inc., a Delaware (the
“ Parent ”), and the other companies listed on
Exhibit A attached hereto (such other companies
together with the Parent, each a “ Company ” and
collectively, the “ Companies ”), jointly and
severally, 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 Three Million Dollars
($3,000,000), or, if different, the aggregate principal amount of
all Loans (as defined in the Security Agreement referred to below),
together with any accrued and unpaid interest hereon, on
March 27, 2008 (the “ Maturity Date ”) if
not sooner indefeasibly paid in full.
Capitalized
terms used herein without definition shall have the meanings
ascribed to such terms in the Security Agreement among the
Companies and the Holder dated as of the date hereof (as amended,
modified and/or supplemented from time to time, the “
Security Agreement ”).
The
following terms shall apply to this Secured Non-Convertible
Revolving Note (this “ Note ”):
1.1
Contract Rate . Subject to Sections 3.2 and 4.9,
interest payable on the outstanding principal amount of this Note
(the “ Principal Amount ”) shall accrue at a
rate per annum equal to (A)(x) the “prime rate”
published in The Wall Street Journal from time to time (the
“ Prime Rate ”), plus (y) two percent
(2.0%) (the interest rate referred to in the immediately preceding
clauses (x) and (y), collectively, the “Cash Interest
Rate”) plus (B) eight percent (8.0%) (the interest rate
referred in this clause (B), the “Advance Interest
Rate”) (the Cash Interest Rate plus the Advance Interest Rate
are collectively referred to herein as the “ Contract
Rate ”). The Cash Interest 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.
1.2
Cash Portion of the Contract Rate . The interest accruing
and payable on the Principal Amount of the Note at the Cash
Interest Rate shall hereinafter be referred to as the “
Cash Interest Portion ”. The Cash Interest Portion
shall be payable monthly, in arrears, commencing on April 1,
2006 and on the first business day of each consecutive calendar
month thereafter (each, a “ Repayment Date ”)
until and on the Maturity Date, whether by acceleration or
otherwise.
ARTICLE II
ADVANCE INTEREST
2.1
Advance Interest Portion of the Contract Rate . The interest
accruing and payable on the Principal Amount of the Note at the
Advance Interest Rate shall hereinafter be referred to as the
“ Advance Interest Portion .” The Advance
Interest Portion shall (i) be nonrefundable and payable
annually in advance (x) on the date hereof for the period from
the date hereof to and including the date immediately preceding the
date that is first anniversary of this and (y) on
March 27, 2007 for the period from the date that is the first
anniversary of this Note to and including the Maturity Date (each
date referred to in the immediately preceding clauses (x) and
(y), an “ Advance Interest Portion Payment Date
”) and be payable in warrants, as set forth below:
(a)
On the date hereof, the Company shall issue a ten year par value
exercise price warrant to the Holder to purchase 218,181 shares of
the Company’s Common Stock; and
(b)
On the date hereof, the Company shall also issue a ten year par
value exercise price warrant to the Holder to purchase up to
240,000 shares of the Company’s Common Stock with the warrant
being unvested on issuance and vesting on the first anniversary of
this Note for a number of shares equal to (i) eight percent
(8.0%) of the average daily balance outstanding under this Note for
the twelve months period ending on the first anniversary of this
Note divided by (ii) the greater of (x) $1.00 and (y) the
average closing price of the Common Stock for the three trading
days prior to the first anniversary of this Note
.
ARTICLE III
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
3.1
Events of Default . The occurrence of an Event of Default
under the Security Agreement shall constitute an event of default
(“ Event of Default ”) hereunder.
3.2
Default Interest . Following the occurrence and during the
continuance of an Event of Default, the Companies shall, jointly
and severally, pay additional interest on the outstanding principal
balance of this Note in an amount equal to two percent (2%) per
month, and all outstanding Obligations, 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.
2
3.3
Default Payment . If an Event of Default occurs and is
continuing, the Holder, at its option, may elect, in addition to
all rights and remedies of the Holder under the Security Agreement
and the other Ancillary Agreements and all obligations and
liabilities of each Company under the Security Agreement and the
other Ancillary Agreements, to require the Companies, jointly and
severally, to make a Default Payment (“ Default
Payment ”) due and payable within ten days after written
notice from the Holder to the Company ( “Default Notice
Period” ) of an Event of Default. If during the Default
Notice Period, the Company cures the Event of Default, the Event of
Default will no lon
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