EXHIBIT 4.9
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS NOTE OR THE SHARES OF COMMON STOCK UNDER SAID ACT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO JMAR TECHNOLOGIES, INC., THAT
SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, JMAR TECHNOLOGIES, INC., a Delaware
Borrower ("JMAR"), JMAR RESEARCH, INC., a California Borrower ("JRI"), JMAR/XXX
NANOLITHOGRAPHY, INC. a California Borrower ("JSAL"), JSI MICROELECTRONICS,
INC., a California Borrower ("JME" and together with JRI, JSAL and JMAR, the
"BORROWER"), jointly and severally, hereby promise to pay to LAURUS MASTER FUND,
LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate
House, South Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"HOLDER") or its registered assigns or successors in interest, on order, without
demand, the outstanding principal amount of all loans made by the Holder to the
Borrower under the terms of this Note (each an "ADVANCE" and collectively the
"ADVANCES"). The aggregate principal amount of all Advances outstanding
hereunder shall not exceed THREE MILLION DOLLARS ($3,000,000), and no Advance
shall be made after March 21, 2006 (the "MATURITY DATE"). The amount and date of
each Advance shall be entered by the Holder into Holder's records, which records
shall be conclusive evidence of the subject matter thereof absent manifest
error.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in the Purchase and Security Agreement
between the Borrower and the Holder dated the date hereof (the "PURCHASE
AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST
1.1 Interest Rate. Except as modified by Section 1.2
below, the Borrower shall pay interest at the Contract Rate on the unpaid
principal balance of the Note until such time as such balance or portion thereof
is collected in full in good funds in dollars of the United States of America.
Interest shall be payable in arrears commencing one month from the date hereof
and on the first business day of each consecutive calendar month thereafter, and
on the Maturity Date, accelerated or otherwise, due and payable as described
below.
1.2 Default Rate. After the Default Notice Period, the
Default Rate, as defined in the Purchase Agreement, shall apply to the amounts
owed hereunder.
ARTICLE II
ADVANCES UNDER NOTE
2.1 Authorized Person.
(a) Any officer of JMAR who has been disclosed to the
Holder in writing as an authorized officer for such purposes (an "AUTHORIZED
PERSON") may request an Advance on any day other than a Saturday, Sunday or
other day when commercial banks located in New York, New York are not open for
commercial banking business. Such request shall be made in writing delivered to
the Holder by not later than 12:00 p.m. on the day of the requested Advance.
(b) The Borrower hereby authorizes the Holder to rely
upon the written instructions of any person identifying himself or herself as an
Authorized Person and upon any signature which the Holder believes to be
genuine, and the Borrower shall be bound thereby in the same manner as if such
person were authorized or such signature were genuine.
2.2 Limitation on Advances. It is expressly understood that the
Holder is under no obligation to make any Advance to the Borrower under this
Note (whether by reason of any provision hereof or otherwise) (i) if an Event of
Default, as hereinafter defined, has occurred and is continuing, or (ii) if such
Advance or any part thereof would cause the aggregate amount of all Advances
made hereunder to exceed the Accounts Availability.
ARTICLE III
CONVERSION RIGHTS
3.1. Conversion into JMAR's Common Stock.
(a) To the extent that Advances have been made hereunder,
the Holder shall have the right, but not the obligation (except as provided in
Section 3.3 hereof), from and after the date hereof, and then, subject to
Section 3.1(c) at any time until the Maturity Date, to convert the principal
portion of the Advances made hereunder and/or interest and fees due and payable
into fully paid and nonassessable shares of common stock of JMAR as such stock
exists on the date of issuance of this Note, or any shares of capital stock of
JMAR into which such stock shall hereafter be changed or reclassified (the
"COMMON STOCK") at the Conversion Price as defined below. In the event that the
Holder elects to convert this Note into Common Stock (to the extent permitted
herein), the Holder shall give notice of such election by delivering an executed
and completed notice of conversion ("NOTICE OF CONVERSION") to JMAR and such
Notice of Conversion shall provide a breakdown in reasonable detail of the
amount of Note principal, interest and fees that are being converted. On each
Conversion Date (as hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the Advances,
interest and fees as entered in its records and shall provide written notice
thereof to the Borrower within 2 business days after the Conversion Date. Each
date on
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which a Notice of Conversion is delivered or telecopied to JMAR in accordance
with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION
DATE"). A form of Notice of Conversion that may be employed by the Holder is
annexed hereto as Exhibit A. JMAR will cause the transfer agent to transmit the
certificates representing the shares of the Common Stock issuable upon
conversion of the Note to the Holder by crediting the account of the Holder's
designated broker with the Depository Trust Borrower ("DTC") through its Deposit
Withdrawal Agent Commission ("DWAC") system within three (3) business days after
receipt by JMAR of the Notice of Conversion (the "DELIVERY DATE").
In the case of the exercise of the conversion rights set forth
herein the conversion privilege shall be deemed to have been exercised and the
shares of Common Stock issuable upon such conversion shall be deemed to have
been issued upon the date of receipt by JMAR of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such Common
Stock, unless the Holder provides JMAR written instructions to the contrary.
(b) The Conversion Price per share shall be $0.92 (the
"CONVERSION PRICE"); provided, however that if the Conversion Price as adjusted
by this proviso is greater than the Conversion Price prior to such adjustment,
then for every $2 million of conversions made hereunder, the Conversion Price
thereafter shall be increased to equal 103% of the average closing price for the
three days prior to the last day of the period during which such $2 million has
been converted. The Conversion Price is subject to further adjustment as
provided in Section 3.1(e) hereof.
If after the Default Notice Period (as defined below) the
Borrower has not repaid in full the amounts then due hereunder or cured the
Event of Default, then the Conversion Price shall be reduced and shall be equal
to the lower of (i) the Conversion Price; or (ii) eighty percent (80%) of the
average of the three lowest closing prices for the Common Stock on NASD OTC
Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market 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, the
"PRINCIPAL MARKET"), or on any securities exchange or other securities market on
which the Common Stock is then being listed or traded, for the thirty (30)
trading days prior to but not including the Conversion Date.
(c) Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to the terms of
this Note an amount that wouldresult in the Holder's beneficial ownership (as
defined below) of JMAR Common Stock being in excess of 4.99%. For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. The Holder may void the conversion limitation described in this
section upon 75 days prior notice to JMAR or upon an Event of Default hereunder.
(d) The Borrower understands that a delay in the delivery
of the shares of Common Stock in the form required pursuant to this Article
beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of the such shares in the form required
pursuant to this Article III upon conversion of the Note, in the amount equal to
the greater of (i) $500 per business day after the Delivery Date and (ii) the
Holder's actual damages from such delayed delivery. The Borrower 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 conversion, and
shall be calculated as the amount by which (A) the
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Purchaser's total purchase price (including customary brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (B) the aggregate
principal and/or interest amount of the Note, for which such Conversion Notice
was not timely honored.
(e) The Conversion Price and number and kind of shares or
other securities to be issued upon conversion shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows):
X. Xxxxxx, Sale of Assets, etc. The Borrower at
any time shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other Borrower, this Note, as to the unpaid
principal portion thereof and accrued interest thereon shall thereafter be
deemed to evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
number of shares of Common Stock the Holder could have acquired immediately
prior to such consolidation, merger, sale or conveyance based on the Conversion
Price as of the closing date thereof. The foregoing provision shall similarly
apply to successive transactions of a similar nature by any such successor or
purchaser. Without limiting the generality of the foregoing, the provisions of
this Section shall apply to such securities of such successor or purchaser after
any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at
any time shall, by reclassification or otherwise, change the Common Stock into
the same or a different number of securities of any class or classes, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the number of shares of Common Stock into which
the Note would have been convertible immediately prior to such reclassification
or other change at the Conversion Price as of the effective date for such
reclassification or change.
C. Stock Splits, Combinations and Dividends. If
the shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price shall be proportionately reduced
in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
D. Share Issuance. Subject to the provisions of
this Section, if the Borrower at any time shall issue any shares of Common Stock
prior to the conversion of the portion of the principal amount of the Note
permitted by Section 3.1(a) (otherwise than as: (i) provided in Sections
3.1(e)A, 3.1(e)B or 3.1(e)C or this subparagraph D; (ii) pursuant to warrants,
options or convertible securities that are outstanding as of the Closing Date
and warrants, options and convertible securities that may be granted in the
future under any option plan of the Borrower, or any employment agreement, joint
venture, credit, leasing or other financing agreement or any joint venture or
other strategic arrangement, in each case now or hereinafter entered into by the
Borrower, (iii) pursuant to any securities issued by the Borrower to the Holder;
or (iv) pursuant to any agreement entered into by the Company or any of its
subsidiaries for the acquisition of another business (whether by stock purchase
or asset purchase, merger or otherwise; ((i), (ii) and (iii) above, are
hereinafter referred to as the "EXCLUDED ISSUANCES")) for a consideration less
than the Conversion Price that would be in effect at the time of such issue,
then, and thereafter successively upon each such issue, the Conversion Price
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shall be reduced as follows: (i) the number of shares of Common Stock
outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect at the time of such issue and the product shall be
added to the aggregate consideration, if any, received by the Borrower upon such
issue of additional shares of Common Stock; and (ii) the sum so obtained shall
be divided by the number of shares of Common Stock outstanding immediately after
such issue. The resulting quotient shall be the adjusted Conversion Price.
Except for the Excluded Issuances for purposes of this adjustment, the issuance
of any security of the Borrower carrying the right to convert such security into
shares of Common Stock or of any warrant, right or option to purchase Common
Stock shall result in an adjustment to the Conversion Price upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights.
(f) During the period the conversion right exists, JMAR
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the conversion of
this Note to the extent permitted by Section 3.1(a). JMAR represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. XXXX agrees that XXXX's issuance of this Note shall constitute
full authority to JMAR's officers, agents, and transfer agents who are charged
with the duty of executing and issuing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the conversion of
this Note.
3.2 Registration Rights. The Holder has been granted
registration rights with respect to the shares of Common Stock issuable upon
conversion of this Note as more fully set forth in a Registration Rights
Agreement dated the date hereof (the "REGISTRATION RIGHTS AGREEMENT.")
3.3 Required Conversion. In the event that the volume
weighted average price (as determined by the AQR function on the Bloomberg
terminal) of JMAR's Common Stock for all trades during any 11 consecutive
trading day period on the Principal Market is greater than 118% of the
Conversion Price, then JMAR may, at its sole option, provide the Holder
irrevocable written notice ("CALL NOTICE") requiring the conversion at the
Conversion Price of all or a portion of the Note held by the Holder as of the
date set forth in such Call Notice (the "CALL DATE"), which such date shall be
at least 11 trading days following the date of the Call Notice, provided a
registration statement covering resales of that number of shares of Common Stock
then issuable upon conversion of this Note pursuant to such Call Notice has been
declared effective and is available for use. The amount of Common Stock to be
issued in connection with any such conversion pursuant to a particular Call
Notice pursuant to this Section 3.3 shall not exceed 25% of the aggregate dollar
trading volume of the Common Stock for the 11 trading days immediately preceding
the Call Date. If the volume weighted average price (as determined by the AQR
function on the Bloomberg terminal) of the Common Stock for all trades during
any 11 consecutive trading day period preceding the Call Date falls below 118%
of the Conversion Price during the 11 trading day period preceding the Call
Date, then the Holder will no longer be required to convert the Note pursuant to
such Call Notice. JMAR shall not be permitted to give the Investor more than one
notice during any 22-day period.
3.4 Overall Limit on Common Stock Issuable. For so long
as the Borrower is subject to the rules of the Nasdaq Stock Market, the number
of shares of Common Stock issuable by the Borrower and acquirable by the Holder
under all securities issued by the Company to the Holder, shall not exceed
4,769,535 shares, subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations
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affecting the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the
issuance of shares hereunder in excess of the Maximum Common Stock Issuance
shall first be approved by the Borrower's shareholders. If at any point in time
and from time to time the number of shares of Common Stock issued pursuant to
conversion of this Note, together with the number of shares of Common Stock that
would then be issuable by the Borrower in the event of the conversion or
exercise of all other securities issued by the Company, would exceed the Maximum
Common Stock Issuance but for this Section, then upon written notice provided by
the Holder, which such notice shall not be provided until the Holder has been
issued in the aggregate not less than 3,500,000 shares of Common Stock, the
Borrower shall promptly call a shareholders meeting to obtain shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance.
ARTICLE IV
EVENT OF DEFAULT
If an Event of Default (as defined below) occurs and is
continuing, the Holder may make all sums of principal, accrued but unpaid
interests and other fees then remaining unpaid hereon and all other amounts
payable hereunder due and payable within 5 days of written notice from the
Holder to the Borrower (each occurrence being a "DEFAULT NOTICE PERIOD") of an
Event of Default. If during the Default Notice Period, the Borrower cures the
Event of Default, the Event of Default will no longer exist and any rights the
Holder had pertaining to the Event of Default will no longer exist. If after the
Default Notice Period, the Event of Default has not been cured, all amounts
payable hereunder shall be immediately due and payable, all without further
demand, presentment or notice, or grace period, all of which hereby are
expressly waived. In the event of such an acceleration, the amount due and owing
to the Holder shall be 120% of the outstanding principal amount of the Note
(plus accrued and unpaid interest and fees, if any). The remedies under this
Note shall be cumulative.
The occurrence of any of the following events is an Event of
Default ("EVENT OF DEFAULT"):
4.1 Failure to Deliver Common Stock or Replacement Note.
The Borrower's failure to timely deliver Common Stock to the Holder pursuant to
and in the form required by this Note.
4.2 Stop Trade. An SEC stop trade order or Principal
Market trading suspension of the Common Stock for 5 consecutive days or 5 days
during a period of 10 consecutive days, excluding in all cases a suspension of
all trading on a Principal Market.
4.3 Default Under Related Agreement. An Event of Default
occurs under and as defined in the Purchase Agreement dated as of the date
hereof between Borrower and Holder, as such agreement may be amended, modified
and supplemented from time to time.
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ARTICLE V
MISCELLANEOUS
5.1 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.
5.2 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 (i) the Borrower at the address as set forth on the signature page to the
Purchase Agreement executed in connection herewith and, as the case may be, to
the Borrower at the address as set forth in Section 6(g) of the Registration
Rights Agreement, in each case, and (ii) the Holder at the address set forth on
the signature page to the Purchase Agreement for such Holder, with a copy to
Xxxxxx X. Xxxxxx, Esq., 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, facsimile number (000) 000-0000, or at such other address as the
Borrower, the Borrower or the Holder may designate by ten days advance written
notice to the other parties hereto made and delivered in accordance with this
Section 5.2.
5.3 Amendment Provision. The term "Note" and all
reference 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.
5.4 Assignability. This Note (except for Article III)
shall be binding upon the Borrower 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. Article III and Article V of this Note (excluding
Section 5.6 and 5.7) shall be binding upon the Borrower and its successors and
assigns.
5.5 Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however that the Purchaser may choose to waive
this provision and bring an action outside the state of New York. Both parties
and the individual signing this Note on behalf of the Borrower, the Borrower and
the Holder agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. 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
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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 unenforceability of any other
provision of this Note.
5.6 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 permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to
the Borrower.
5.7 Security Interest. The holder of this Note has been
granted a security interest in certain assets of the Borrower more fully
described in the Purchase Agreement.
5.8 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.
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name effective as of this 21st day of March, 2003.
JMAR TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
JMAR RESEARCH, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Acting President
JMAR/XXX NANOLITHOGRAPHY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
JSI MICROELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
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NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by JMAR TECHNOLOGIES, INC.
on March 21, 2003 into Shares of Common Stock of JMAR TECHNOLOGIES, INC. (the
"Company") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
DTC Number:_____________________________________________________________________
Account Number:_________________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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