Current Assets

Exhibit 10.3

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of this 16th day of March 2007 (the “Effective Date”), by and among JMAR Technologies, Inc., a company organized and existing under the laws of the State of Delaware (the “Seller”), and Gatan, Inc., a company organized and existing under the laws of the State of Pennsylvania (the “Buyer”) (Seller and Buyer are together referred to herein as the “Parties”).

WITNESSETH:

WHEREAS, Seller owns or is in lawful possession of property, fixed assets, inventories, work-in-progress, spare parts, records, goodwill, know-how, intellectual property, and other interests used by Seller in, and associated with, the activities and operations of manufacturing, sales and services of the x-ray microscopy business (collectively, “Assets”); and

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from Seller, all such Assets owned by Seller and identified herein in Exhibit A (“Purchased Assets”) and in Exhibit C (“Patents”); and

WHEREAS, Seller desires to confer to Buyer, and Buyer desires to accept from Seller, all such Assets loaned to Seller and identified in Exhibit B (“Loaned Assets”);

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from Seller, all patent material related to the x-ray microscopy (“XRM”), including but not limited to issued patents, patent applications, and provision applications, as further described in Exhibit C (“Patents”);

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, agreements and other good and valuable consideration of the Parties hereinafter set forth, the Parties hereto, intending to be legally bound, do hereby agree as follows:

Assets

	1.		Seller hereby grants to Buyer all of Seller’s right, title, and interest in the Assets.
	2.		In the event that the consent or approval of a third party is required for such transfer of Assets, or to complete patent applications for such Assets, Seller agrees to use its best efforts to obtain the requisite consent or approval.
	3.		All costs associated with applying for and maintaining patents shall hereinafter be at Buyer’s expense.
	4.		Buyer and Seller agree and acknowledge that the Loaned Assets are the property of the federal government, and were lawfully loaned to Seller. If the Loaned Assets are required to be returned to the federal government within three (3) years of the Effective Date, Buyer may deduct the depreciated replacement value from monies owed to Seller. Such depreciated replacement value shall be calculated by determining the fair market value of a similar replacement product, and linearly depreciating the product beginning on the Effective Date and ending five (5) years thereafter.
	5.		Seller agrees to assist Buyer in obtaining inventor rights and signatures required for transfer of intellectual property and completing patent applications. For work amounting to less than four (4) hours per calendar quarter, no compensation will be due Seller. Seller shall be entitled to reimbursement of reasonable wages and administrative fees for work in excess of four (4) hours that is commissioned or requested by Buyer.

Payments

	1.		Within five (5) business days of execution of the Agreement, Buyer shall pay to Seller $100,000.00.
	2.		Buyer agrees to pay to ship the Assets, plus the reasonable cost of Seller’s employees working on the Assets from the Effective Date until receipt and acceptance of the Assets by Buyer. The following conditions shall apply:

	a.		Seller shall submit invoices to Buyer detailing the reasonable costs associated with the packing and shipment of the Assets, employee wages, and employee travel expenses. No overhead charges of Seller shall be reimbursed by Buyer. Buyer will reimburse Seller up to two (2) weeks of employee wages for packing and shipment work performed prior to the signing of the Agreement.
	b.		Buyer shall reimburse Seller for such reasonable expenses within twenty-one (21) days following receipt of invoices from Seller.
	c.		In no such event shall Buyer be obligated to reimburse Seller or pay any amount in excess of $50,000.00 for the costs and expenses described herein.
	d.		Seller shall use its best efforts to deliver the Assets, including all documentation, drawings, control software and related materials, to Buyer immediately following the Effective Date.

3.

Buyer shall pay to Seller $500,000.00 following the installation and successful operation of the XRM. The following conditions shall apply:

	a.		The criteria for “successful operation” shall be deemed to occur when the microscope acquires an image with at least 80nm resolution for five (5) consecutive business days.
	b.		Seller shall be responsible for establishing successful operation of the XRM at Buyer’s chosen place of business, and Buyer shall cooperate fully in this regard.
	c.		Buyer shall make such payment to Seller following successful operation and within twenty-one (21) days of receipt of Seller’s invoice.

4.

Buyer shall pay to Seller $100,000.00 if and when the XRM reaches the flux and resolution target. The flux and resolution target shall be deemed reached when the XRM can acquire an image with spatial resolution of at least 40nm, and in a separate experiment, demonstrate an average flux of 5 detected soft-x-ray photons/s/pixel, assuming 20um pixels, 1000X magnification and no sample present.

Royalties

	1.		Buyer shall pay to Seller five percent (5%) of the revenue received by Buyer pursuant to completed sales of x-ray microscopes (“Royalties”) for four (4) years (“Royalty Period”) following Buyer’s first sale of an x-ray microscope derived from the Assets to a third-party.
	2.		Buyer shall have no obligation to pay Royalties upon the conclusion of the Royalty Period.
	3.		Buyer shall pay Royalties to Seller annually, in arrears, in January of each year along with supporting documentation.
	4.		Buyer and Seller agree and acknowledge that the intent hereunder is for Seller to earn Royalties for technologies developed to feasibility by Seller. This includes the complete x-ray microscope (source, room temperature stage, microscope optics, camera, acquisition software) sufficient to produce single images, a soft x-ray microscope source based on laser plasma x-ray sources, or a soft x-ray microscope without the source.

	5.		Royalties shall not be due on any existing product or product lines of Buyer or its affiliates. Any revenue derived from the products of Buyer that are sold into or included in x-ray microscopy or electron microscopes shall not be subject to Royalties. This includes cryotransfer holders and stages, tomography acquisition software, analysis and visualization software, x-ray cameras sold separately from the original x-ray microscope sale, and specimen preparation products.
	6.		Revenues derived from service, spares, and installations are not subject to Royalties.
	7.		Seller agrees not to produce x-ray microscopes or sources for x-ray microscopes, nor enable or assist others to do so, for the duration of the Royalty Period, provided that Buyer launches or intends to launch a commercial soft-x-ray microscope product within four (4) years after execution of this Agreement.
	8.		In the event of any transfer or assignment by Buyer of any technology subject to Royalties hereunder, Seller shall be entitled to the Royalties that Seller would have received had the sales been made by Buyer.

Supplier Arrangement

	1.		Seller shall serve as the exclusive laser supplier for Buyer’s soft x-ray nCT product line during the Royalty Period.
	2.		Seller shall supply such lasers to Buyer at a price discounted from that which Seller routinely offers in the marketplace, and in no such event shall the annual average gross margin of the laser system on sales to Buyer exceed forty percent (40%).
	3.		In the event that Seller is not able to match the technical or commercial specifications required by Buyer within thirty (30) days following notice by Buyer of a commercial alternative meeting such specifications, then the exclusivity described herein shall terminate.
	4.		In the event that Seller is unable to manufacture the laser described herein, Seller shall provide Buyer with access to the Seller’s design and manufacturing information, and shall cooperate fully with Buyer’s efforts related to obtaining a replacement. Seller shall grant to or obtain for Buyer, at no cost to Buyer, any license necessary for the supply of such laser to Buyer.
	5.		Buyer shall pay to Seller $318,750.00, or an OEM discount of fifteen percent (15%), whichever is less, for the first laser system purchased from Seller. Buyer shall place such order in 2007, and may change the specifications of the required laser while preserving the discount rate of fifteen percent (15%).
	6.		Buyer and Seller agree and acknowledge that this laser is not a complete Brightlight 75 system and will not achieve similar performance. This shall be a prototype system capable of supplying approximately 50W of power. Seller shall not be responsible for upgrading this system beyond its existing capabilities (i.e., those demonstrated and discussed during the due-diligence period), but shall remain responsible for servicing the laser to maintain current capability. Seller shall provide warranty service on the laser supplied with the prototype provided for a period of two (2) years following the Effective Date. This warranty service will cover parts and shipping costs.
	7.		Buyer acknowledges that, following demonstration of successful operation, the Seller provides the system in “As-Is” condition. No warranty is provided by the Seller on any parts of the system except the laser.

Governing Law: This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of California. Any legal suit, action or proceeding shall be brought in Alameda County, California.

Indemnifications: Each party (“Indemnifying Party”) shall indemnify the other (“Indemnified Party”) against any claim, liability, or loss (including reasonable attorney’s fees and court costs) resulting from injury to or death of any person, any damage to property, or loss of revenues due to (i) the acts or omissions of Indemnifying Party, its contractors, subcontractors, agents or representatives; (ii) any breach of this Agreement by Indemnifying Party, its contractors, subcontractors, agents or representatives; or (iii) the negligence or willful misconduct of Indemnifying Party or its contractors, subcontractors, agents, or representatives. In the event that Indemnified Party seeks indemnification hereunder, Indemnifying Party shall have no obligation to indemnify as provided herein unless Indemnified Party provides prompt written notice to Indemnifying Party of any such claims and allows Indemnifying Party the right (but not the obligation) to control the defense, negotiations, and/or settlement of such claim. Indemnified Party and its counsel may participate in such proceedings at it own expense but not control such proceedings, negotiations, or defense as counsel of record if Indemnifying Party chooses to control the defense. In such event that Indemnifying Party chooses to control the defense, Indemnified Party shall not admit any liability, settle, compromise, pay, or discharge any such claim, demand, suit or proceeding without the prior written consent of Indemnifying Party, which will not be unreasonably delayed, conditioned, or withheld.

Press Releases: Seller will not include direct or indirect references to Buyer in public forums without written authorization, except for Seller’s disclosure obligations under federal securities laws which may require disclosure of Buyer’s name.

Exhibit A

Purchased Assets

The functional x-ray microscope shall include the following materials:

Item
#		Description		Model		Use		Manual / Software
1		Small chiller		Merlin m33		cools pumps, power meter		no
2		Small breadboard		Newport 1x4x2”		hold scrolls		no
3		Dustfilter x2		Edwards ###-###-####				no
4		XRM vacuum / gas system						custom software
5		XRM laser optics spares						no
6		XRM laser beam delivery system		Assorted optomechanics + CVI optics				no
7		YAG Laser		BriteLight 75		Currently only ~50W output power		manual
8		Laser control computer + beam viewer						no
9		Laser electronics rack		JMAR				no
10		Laser oscilloscope		Tektronix TDS694C		x-ray diode monitoring		no
11		Laser optical table		3x4x2” Newport + legs				no
12		HeNe Laser + mount		Melles Griot 05lhr111		rough alignment tool		no
13		Power meter		Gentec PS-300V3, serial 153293		main dump		no
14		IR viewer						no
15		Monitor + 2 cameras		Wat-137lh, IAE, AN064pn/pp		alignment tools		no
16		Stage encoder readouts x8		Renishaw		sample chamber		manuals
17		Stage driver box		Nanomotion		sample chamber		manuals, software
18		Fiber light illuminator		X-Cite 120		for integrated VLM		manual
19		VLM camera		Coolsnap ES, A05K877004				manual, software
20		Microscope “top”		Nikon, MBE74100				manual
21		Sample vacuum chamber + flanges + 2x cube		Lesker				no
22		Source vacuum chamber		Lesker				no
23		Vacuum bellows						no
24		Nozzle xyz stage		Newfocus 9041		in source chamber		manuals
25		3x pico motors		Serial 1181		in source chamber		manuals

Item
#		Description		Model		Use		Manual / Software
26		2x CCD		Prosilica		in source chamber		manuals, software
27		CCD microscope objective		Edmund optics		in source chamber		no
28		Custom in vacuum sample /optics positioning		8x nanomotion motors, 4 PI stages		in source chamber		manuals, software
29		Custom x-ray camera positioning system				on optical table		no
30		Optical table + feet		4x8x1, Newport, Melles Legs				no
31		4x newfocus pico motor ethernet controllers		Model 8752				manuals
32		newfocus picomotor joystick x2		Model 8754				manuals
33		Tektronix scope		TDS1012		shutter synchronization		no
34		Datalogger		Agilent 34970A		temperature monitoring		manuals, software
35		Delay generator x4		SRS DG535		synchronization		no
36		XRM control computer		ATC		runs xrm vacuum system sample stages		no
37		XRM imaging computer				runs x-ray ccd + VLM ccd		no
38		Hp ethernet switch						no
39		Jet viewing computer						no
40		2x UPS						manuals
41		Custom shutter control box						no
42		Custom XRM electronics box						no
43		Digital laser power readout		Gentec duo, 151161				no
44		Analog laser power readout		Gentec, TPM-300				no
45		X-ray objective zone plate x2		Xradia				specs
46		X-Ray condenser zone plate		Xradia				specs
47		Partial x-ray condenser zone plate x2		Xradia				specs
48		Spare nozzles						no
49		Spare x-ray windows						no
50		table top mini clean room						no
51		Desiccator						no
52		Chiller
53		X-ray metrology equipment

Additionally, the following spare optics will be transferred:

Lenses
QTY3 LAP-75 0-15-1064
QTY4 LAPQ-75.0-15-1064
QTY1 PLCX-25.4-3683-UV-1064
QTY1 PLCC-25.4-51.5-C-1064/532
QTY1 PLCC-25.4-360.6-UV-1064
QTY2 PLCC-25.4-77.3-UV-1064
QTY1 PLCX-25.4-77.3-C-1064/532

Windows
QTY 2 W2-PW1-1025-1064-0
QTY 3 PW1-1025UV-1064-0

Mirrors
QTY 4 Y1-2037-60-S
QTY 2 Y1-2037-45-P
QTY 2 Y1-1025-0
QTY 2 Y1-2037-45-UNP
QTY 1 Y1-1064-2025-45-UNP
QTY 4 Y1-1025-45-UNP

Beam Splitter
QTY 1 BS1-1064-70-1025-45UNP
QTY 2 BS1-1064-50-1025-45P

Exhibit B

Loaned Assets

Item #		Description		Model #		Use		Manual/ Software
1		Scroll pump		Varian pts06001univ		pumps source		no
2		Scroll pump		Varian pts03001univ		pumps sample		manual
3		Turbo pump		Varian tv1001		pumps source		manual + software
4		Oscilloscope		Lecroy waverunner 6KAA				manual
5		X-Ray camera		Princeton Instruments				manual
				1300x1340 soft x-ray CCD,
				J010022, property of JMAR
				stickers + controller +
				interface card
6		CCD microscope objective		Melles Griot 59lgn705				manual
7		Laser power meter		Gentech, up55N, serial 167563				manual + software
8		Laser beam profiler		Photon Inc, USBPro				manual
9		Focusing lens xyz stage		Newfocus encoded staged + picomotors		on optical table

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date indicated below:

Gatan, Inc

By:		/s/ THOMAS G. CONNELLY
		Printed Name: THOMAS G. CONNELLY
		Title: PRESIDENT
		Date: March 16, 2007

JMAR Technologies, Inc

By:		/s/ C. NEIL BEER
		Printed Name: C. NEIL BEER
		Title: PRESIDENT & CEO
		Date: 3/16/2007