SECOND AMENDED AND RESTATED SECURED TERM NOTE
SECOND
AMENDED AND RESTATED SECURED TERM NOTE
FOR
VALUE
RECEIVED, SCIENCE DYNAMICS CORPORATION, a Delaware corporation (the
“Borrower”),
hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, ▇▇▇▇▇▇ House, South Church Street, ▇▇▇▇▇▇
Town, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the “Holder”)
or its
registered assigns or successors in interest, on order, the sum of Two Hundred
Fifty Thousand Dollars ($250,000), together with any accrued and unpaid interest
hereon, on September 18, 2007 (the “Maturity
Date”)
if not
sooner paid. This Note amends and restates in its entirety, and is given in
substitution for and not in satisfaction of that certain promissory note in
the
original principal amount of $2,000,000 issued by the Company in favor of the
Holder on February 11, 2005, and amended and restated as of July 27,
2006.
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 Borrower and the Holder (as amended, modified or supplemented from
time to time, the “Purchase
Agreement”).
The
following terms shall apply to this Amended and Restated Secured Term Note
(this
“Note”):
ARTICLE
I
INTEREST
& AMORTIZATION
1.1(a) Interest
Rate.
Subject
to Sections 4.11 and 5.6 hereof, interest payable on this Note shall accrue
at a
rate per annum (the “Interest Rate”) equal to the “prime rate” published in
The
Wall Street Journal
from
time to time, plus three percent (3%). The prime 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 such rate. Subject to Section 1.1(b)
hereof, the Interest Rate shall not be less than eight percent (8.0%). Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on August 1, 2006 and on the first business
day
of each consecutive calendar month thereafter until the Maturity Date (and
on
the Maturity Date), whether by acceleration or otherwise (each, a “Repayment
Date”).
1.1(b)
Interest
Rate Adjustment.
The
Interest Rate shall be calculated on the last business day of each month
hereafter until the Maturity Date (each a “Determination Date”) and shall be
subject to adjustment as set forth herein.
1.2 Principal
Repayment. The
aggregate principal amount outstanding under this Note shall be due and payable
on the Maturity Date.
1
ARTICLE
II
REDEMPTION
2.1 Optional
Redemption.
The
Borrower will have the option of prepaying this Note (“Optional
Redemption”)
by
paying to the Holder a sum of money equal to one hundred percent (100%) of
the
principal amount of this Note together with accrued but unpaid interest thereon
and any and all other sums due, accrued or payable to the Holder arising under
this Note, the Purchase Agreement, or any Related Agreement (the “Redemption
Amount”)
outstanding on the Redemption Payment Date (as defined below). The Borrower
shall deliver to the Holder a written notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be within ten (10) business days after the date of the Notice of
Redemption (the “Redemption
Period”).
On
the Redemption Payment Date, the Redemption Amount must be paid in good funds
to
the Holder. In the event the Borrower fails to pay the Redemption Amount on
the
Redemption Payment Date as set forth herein, then such Redemption Notice will
be
null and void.
ARTICLE
III
[RESERVED]
ARTICLE
IV
EVENTS
OF DEFAULT
Upon
the
occurrence and continuance of an Event of Default beyond any applicable grace
period, the Holder may make all sums of principal, interest and other fees
then
remaining unpaid hereon and all other amounts payable hereunder immediately
due
and payable. In the event of such an acceleration, the amount due and owing
to
the Holder shall be 100% of the outstanding principal amount of the Note (plus
accrued and unpaid interest and fees, if any) (the “Default
Payment”).
The
Default Payment shall be applied first to any fees due and payable to Holder
pursuant to the Note or the Related Agreements, then to accrued and unpaid
interest due on the Note and then to outstanding principal balance of the
Note.
The
occurrence of any of the following events set forth in Sections 4.1 through
4.10, inclusive, is an “Event
of Default”:
4.1 Failure
to Pay Principal, Interest or other Fees.
The
Borrower fails to pay when due any installment of principal, interest or other
fees hereon in accordance herewith, or the Borrower fails to pay when due any
amount due under any other promissory note issued by Borrower, 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.
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4.2 Breach
of Covenant.
The
Borrower breaches any covenant or any other term or condition of this Note
or
the Purchase Agreement in any material respect, or the Borrower or any of its
Subsidiaries breaches any covenant or any other term or condition of any Related
Agreement in any material respect and, in any such case, such breach, if subject
to cure, continues for a period of fifteen (15) days after the occurrence
thereof.
4.3 Breach
of Representations and Warranties.
Any
representation or warranty made by the Borrower in this Note or the Purchase
Agreement, or by the Borrower or any of its Subsidiaries in any Related
Agreement, shall, in any such case, be false or misleading in any material
respect on the date that such representation or warranty was made or deemed
made.
4.4 Receiver
or Trustee.
The
Borrower or any of its Subsidiaries shall make an assignment for the benefit
of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business; or such a receiver
or trustee shall otherwise be appointed.
4.5 Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
the Borrower or any of its Subsidiaries or any of their respective property
or
other assets for more than $50,000, and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days.
4.6 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Borrower or any of its
Subsidiaries.
4.7 [Reserved].
4.8
Failure
to Deliver Replacement Note.
The
Borrower shall fail to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
4.9 Default
Under Related Agreements or Other Agreements.
The
occurrence and continuance of any Event of Default (as defined in the Purchase
Agreement or any Related Agreement) or any event of default (or similar term)
under any other indebtedness.
4.10 Change
in Control.
The
occurrence of a change in the controlling ownership of the Borrower, other
than
in respect of the acquisition by ▇▇▇▇▇▇ Partners LP of a controlling ownership
interest of the Borrower.
DEFAULT
RELATED PROVISIONS
3
4.11 Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
the
Borrower shall pay additional interest on this Note in an amount equal to two
percent (2%) per month, and all outstanding obligations under this Note,
including unpaid interest, shall continue to accrue such additional interest
from the date of such Event of Default until the date such Event of Default
is
cured or waived.
4.12 [Reserved].
4.13 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
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 the Borrower 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 such Holder, with
a
copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, or at such other
address as the Borrower or the Holder may designate by ten days advance written
notice to the other parties hereto. A Notice of Conversion shall be deemed
given
when made to the Borrower pursuant to the Purchase Agreement.
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, and any successor instrument
issued pursuant to Section 3.5 hereof, as it may be amended or
supplemented.
5.4 Assignability.
This
Note 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 in accordance with the requirements of the Purchase
Agreement. This Note shall not be assigned by the Borrower without the consent
of the Holder.
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. Both parties
and
the individual signing this Note on behalf of the Borrower 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 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. Nothing contained herein
shall be deemed or operate to preclude the Holder from bringing suit or taking
other legal action against the Borrower in any other jurisdiction to collect
on
the Borrower’s obligations to Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court in favor
of the Holder.
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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 and Guarantee.
The
Holder has been granted a security interest (i) in certain assets of the
Borrower and its Subsidiaries as more fully described in the Master Security
Agreement dated as of the date hereof and (ii) pursuant to the Stock Pledge
Agreement dated as of the date hereof. The obligations of the Borrower under
this Note are guaranteed by certain Subsidiaries of the Borrower pursuant to
the
Subsidiary Guaranty dated as of the date hereof.
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.
5.9 Cost
of Collection.
If
default is made in the payment of this Note, the Borrower shall pay to Holder
reasonable costs of collection, including reasonable attorney’s fees.
5.10 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 Borrower (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 Borrower
of this Note to the new holder or the issuance by the Borrower of a new
instrument to the new holder, or (ii) transfer through a book entry system
maintained by the Borrower (or its agent), within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i)(B).
[Balance
of page intentionally left blank; signature page follows.]
5
IN
WITNESS WHEREOF,
the
Borrower has caused this Second Amended and Restated Convertible Term Note
to be
signed in its name effective as of the 18th
day of
September 2006.
| SCIENCE DYNAMICS CORPORATION | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇ | |
| Name: | ▇▇▇▇ ▇▇▇▇▇▇ | |
| Title: | CEO | |
WITNESS:
▇▇▇▇▇▇
▇▇▇▇
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