Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK 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 UNDER
SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SCIENCE DYNAMICS CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right
to
Purchase up to 3,000,000 Shares of Common Stock of
Science
Dynamics Corporation
(subject
to adjustment as provided herein)
AMENDED
AND RESTATED
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No.
_________________
|
Issue
Date: November 18, 2005
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SCIENCE
DYNAMICS CORPORATION, a corporation organized under the laws of the State of
Delaware (“Science Dynamics Corporation”), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business
November 18, 2012 (the "Expiration Date"), up to 3,000,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value
per share, at the applicable Exercise Price per share (as defined below). The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.
As
used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term
"Company" shall include Science Dynamics Corporation and any corporation which
shall succeed, or assume the obligations of, Science Dynamics Corporation
hereunder.
(b) The
term
"Common Stock" includes (i) the Company's Common Stock, par value $0.01 per
share; and (ii) any other securities into which or for which any of the
securities described in the preceding clause (i) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The
term
"Other Securities" refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant
to
Section 4 or otherwise.
A-1
(d) The
"Exercise Price" applicable under this Warrant shall be $0.075.
| 1. |
Exercise
of Warrant.
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1.1 Number
of Shares Issuable upon Exercise.
From
and after the date hereof through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in
part,
by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the "Exercise Notice"), shares of Common Stock
of
the Company, subject to adjustment pursuant to Section 4.
1.2 Fair
Market Value.
For
purposes hereof, the "Fair Market Value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(a) If
the
Company's Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The Nasdaq
Stock Market, Inc.("Nasdaq"), then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination
Date.
(b) If
the
Company's Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board,
then the mean of the average of the closing bid and asked prices reported for
the last business day immediately preceding the Determination Date.
(c) Except
as
provided in clause (d) below, if the Company's Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel
of
persons qualified by education and training to pass on the matter to be
decided.
(d) If
the
Determination Date is the date of a liquidation, dissolution or winding up,
or
any event deemed to be a liquidation, dissolution or winding up pursuant to
the
Company's charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for
the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.
1.3 Company
Acknowledgment.
The
Company will, at the time of the exercise of the Warrant, upon the request
of
the holder hereof acknowledge in writing its continuing obligation to afford
to
such holder any rights to which such holder shall continue to be entitled after
such exercise in accordance with the provisions of this Warrant. If the holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such rights.
1.4 Trustee
for Warrant Holders.
In the
event that a bank or trust company shall have been appointed as trustee for
the
holders of the Warrant pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company
or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.
| 2. |
Procedure
for Exercise.
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2.1 Delivery
of Stock Certificates, Etc., on Exercise.
The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall
have
been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part,
and
in any event within three (3) business days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder, or as such Holder
(upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares
of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 Exercise.
Payment
may be made either (i) in cash or by certified or official bank check payable
to
the order of the Company equal to the applicable aggregate Exercise Price,
(ii)
by delivery of the Warrant, or shares of Common Stock and/or Common Stock
receivable upon exercise of the Warrant in accordance with the formula set
forth
below in this Section 2.2, or (iii) by a combination of any of the foregoing
methods, for the number of Common Shares specified in such Exercise Notice
(as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein. Notwithstanding
any
provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation
as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
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X=Y
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(A-B)
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A
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Where
X
= the
number of shares of Common Stock to be issued to the Holder
| Y = |
the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation)
|
A
= the
Fair
Market Value of one share of the Company's Common Stock (at the date of such
calculation)
B
= Exercise
Price (as adjusted to the date of such calculation)
| 3. |
Effect
of Reorganization, Etc.; Adjustment of Exercise Price.
|
3.1 Reorganization,
Consolidation, Merger, Etc.
In case
at any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan
or arrangement contemplating the dissolution of the Company, then, in each
such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after
the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if
such
Holder had so exercised this Warrant, immediately prior thereto, all subject
to
further adjustment thereafter as provided in Section 4.
3.2 Dissolution.
In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense
deliver or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the Holder of
the
Warrant pursuant to Section 3.1, or, if the Holder shall so instruct the
Company, to a bank or trust company specified by the Holder and having its
principal office in New York, NY as trustee for the Holder of the Warrant (the
“Trustee”).
3.3 Continuation
of Terms.
Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable
to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation
or
merger or the effective date of dissolution following any such transfer, as
the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether
or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full
force
and effect after the consummation of the transactions described in this Section
3, then the Company's securities and property (including cash, where applicable)
receivable by the Holders of the Warrant will be delivered to Holder or the
Trustee as contemplated by Section 3.2.
| 4. |
Extraordinary
Events Regarding Common Stock.
In the event that the Company shall (a) issue additional shares of
the
Common Stock as a dividend or other distribution on outstanding Common
Stock, (b) subdivide its outstanding shares of Common Stock, or (c)
combine its outstanding shares of the Common Stock into a smaller
number
of shares of the Common Stock, then, in each such event, the Exercise
Price shall, simultaneously with the happening of such event, be
adjusted
by multiplying the then Exercise Price by a fraction, the numerator
of
which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall
be the
number of shares of Common Stock outstanding immediately after such
event,
and the product so obtained shall thereafter be the Exercise Price
then in
effect. The Exercise Price, as so adjusted, shall be readjusted in
the
same manner upon the happening of any successive event or events
described
herein in this Section 4. The number of shares of Common Stock that
the
holder of this Warrant shall thereafter, on the exercise hereof as
provided in Section 1, be entitled to receive shall be adjusted to
a
number determined by multiplying the number of shares of Common Stock
that
would otherwise (but for the provisions of this Section 4) be issuable
on
such exercise by a fraction of which (a) the numerator is the Exercise
Price that would otherwise (but for the provisions of this Section
4) be
in effect, and (b) the denominator is the Exercise Price in effect
on the
date of such exercise.
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| 5. |
Certificate
as to Adjustments.
In each case of any adjustment or readjustment in the shares of Common
Stock (or Other Securities) issuable on the exercise of the Warrant,
the
Company at its expense will promptly cause its Chief Financial Officer
or
other appropriate designee to compute such adjustment or readjustment
in
accordance with the terms of the Warrant and prepare a certificate
setting
forth such adjustment or readjustment and showing in detail the facts
upon
which such adjustment or readjustment is based, including a statement
of
(a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or
deemed to have been issued or sold, (b) the number of shares of Common
Stock (or Other Securities) outstanding or deemed to be outstanding,
and
(c) the Exercise Price and the number of shares of Common Stock to
be
received upon exercise of this Warrant, in effect immediately prior
to
such adjustment or readjustment and as adjusted or readjusted as
provided
in this Warrant. The Company will forthwith mail a copy of each such
certificate to the holder of the Warrant and any Warrant agent of
the
Company (appointed pursuant to Section 11
hereof).
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| 6. |
Reservation
of Stock, Etc., Issuable on Exercise of Warrant.
The Company will at all times reserve and keep available, solely
for
issuance and delivery on the exercise of the Warrant, shares of Common
Stock (or Other Securities) from time to time issuable on the exercise
of
the Warrant.
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| 7. |
Assignment;
Exchange of Warrant.
Subject to compliance with applicable securities laws, this Warrant,
and
the rights evidenced hereby, may be transferred by any registered
holder
hereof (a "Transferor") in whole or in part. On the surrender for
exchange
of this Warrant, with the Transferor's endorsement in the form of
Exhibit
B attached hereto (the "Transferor Endorsement Form") and together
with
evidence reasonably satisfactory to the Company demonstrating compliance
with applicable securities laws, which shall include, without limitation,
the provision of a legal opinion from the Transferor's counsel (at
the
Company’s expense) that such transfer is exempt from the registration
requirements of applicable securities laws, and with payment by the
Transferor of any applicable transfer taxes) will issue and deliver
to or
on the order of the Transferor thereof a new Warrant of like tenor,
in the
name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of
Common
Stock called for on the face or faces of the Warrant so surrendered
by the
Transferor.
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| 8. |
Replacement
of Warrant.
On receipt of evidence reasonably satisfactory to the Company of
the loss,
theft, destruction or mutilation of this Warrant and, in the case
of any
such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form and
amount
to the Company or, in the case of any such mutilation, on surrender
and
cancellation of this Warrant, the Company at its expense will execute
and
deliver, in lieu thereof, a new Warrant of like
tenor.
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| 9. |
Reserved.
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| 10. |
Maximum
Exercise.
Notwithstanding anything herein to the contrary, in no event shall
the
Holder be entitled to exercise any portion of this Warrant in excess
of
that portion of this Warrant upon exercise of which the sum of (1)
the
number of shares of Common Stock beneficially owned by the Holder
and its
Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion
of the
Warrant or the unexercised or unconverted portion of any other security
of
the Holder subject to a limitation on conversion analogous to the
limitations contained herein) and (2) the number of shares of Common
Stock
issuable upon the exercise of the portion of this Warrant with respect
to
which the determination of this proviso is being made, would result
in
beneficial ownership by the Holder and its Affiliates of any amount
greater than 9.99% of the then outstanding shares of Common Stock
(whether
or not, at the time of such exercise, the Holder and its Affiliates
beneficially own more than 9.99% of the then outstanding shares of
Common
Stock). As used herein, the term “Affiliate” means any person or entity
that, directly or indirectly through one or more intermediaries,
controls
or is controlled by or is under common control with a person or entity,
as
such terms are used in and construed under Rule 144 under the Securities
Act. For purposes of the proviso to the second preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d)
of the Securities Exchange Act of 1934, as amended, and Regulations
13D-G
thereunder, except as otherwise provided in clause (1) of such proviso.
The limitations set forth herein (x) may be waived by the Holder
upon provision of no less than seventy-five (75) days prior notice
to the
Company and (y) shall automatically become null and void following
notice
to the Company upon the occurrence and during the continuance of
an Event
of Default (as defined in the Note referred to in the Purchase Agreement
dated as of the date hereof among the Holder and the Company (as
amended,
modified, restated and/or supplemented from time to time, the “Purchase
Agreement”)).
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| 11. |
Warrant
Agent.
The Company may, by written notice to the each Holder of the Warrant,
appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this
Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any
such
issuance, exchange or replacement, as the case may be, shall be made
at
such office by such agent.
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| 12. |
Transfer
on the Company's Books.
Until this Warrant is transferred on the books of the Company, the
Company
may treat the registered holder hereof as the absolute owner hereof
for
all purposes, notwithstanding any notice to the
contrary.
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| 13. |
Notices,
Etc.
All notices and other communications from the Company to the Holder
of
this Warrant shall be mailed by first class registered or certified
mail,
postage prepaid, at such address as may have been furnished to the
Company
in writing by such Holder or, until any such Holder furnishes to
the
Company an address, then to, and at the address of, the last Holder
of
this Warrant who has so furnished an address to the
Company.
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| 14. |
Miscellaneous.
This Warrant and any term hereof may be changed, waived, discharged
or
terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination
is
sought. This Warrant shall be governed by and construed in accordance
with
the laws of State of New York without regard to principles of conflicts
of
laws. Any action brought concerning the transactions contemplated
by this
Warrant 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 Holder may choose to waive this provision and bring an action
outside
the state of New York. The individuals executing this Warrant on
behalf of
the Company agree to submit to the jurisdiction of such courts and
waive
trial by jury. 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 Warrant 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
Warrant. The headings in this Warrant are for purposes of reference
only,
and shall not limit or otherwise affect any of the terms hereof.
The
invalidity or unenforceability of any provision hereof shall in no
way
affect the validity or enforceability of any other provision hereof.
The
Company acknowledges that legal counsel participated in the preparation
of
this Warrant 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 Warrant to favor any party
against
the other party.
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[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE
PAGE FOLLOWS.]
IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
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SCIENCE
DYNAMICS
CORPORATION
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WITNESS:
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By:
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/s/ ▇▇▇▇ ▇▇▇▇▇▇ | ||
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Name:
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▇▇▇▇ ▇▇▇▇▇▇ | ||
| ▇▇▇▇▇▇ ▇▇▇▇ |
Title:
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Chief Executive Officer | |
EXHIBIT
A
FORM
OF SUBSCRIPTION
(To
Be
Signed Only On Exercise Of Warrant)
TO: Science
Dynamics Corporation
Attention: Chief
Financial Officer
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):
|
________
shares of the Common Stock covered by such Warrant; or
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the
maximum number of shares of Common Stock covered by such Warrant
pursuant
to the cashless exercise procedure set forth in Section
2.
|
||
The
undersigned herewith makes payment of the full Exercise Price for such shares
at
the price per share provided for in such Warrant, which is $___________. Such
payment takes the form of (check applicable box or boxes):
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$__________
in lawful money of the United States; and/or
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the
cancellation of such portion of the attached Warrant as is exercisable
for
a total of _______ shares of Common Stock (using a Fair Market Value
of
$_______ per share for purposes of this calculation);
and/or
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the
cancellation of such number of shares of Common Stock as is necessary,
in
accordance with the formula set forth in Section 2.2, to exercise
this
Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth
in
Section 2.
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||
The
undersigned requests that the certificates for such shares be issued in the
name
of, and delivered to
______________________________________________________________________________________
whose address is
___________________________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act") or pursuant to an exemption from registration
under the Securities Act.
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Dated:
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||||
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(Signature
must conform to name of holder as specified on the face of the
Warrant)
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Address:
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EXHIBIT
B
FORM
OF TRANSFEROR ENDORSEMENT
(To
Be
Signed Only On Transfer Of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading "Transferees" the right represented
by
the within Warrant to purchase the percentage and number of shares of Common
Stock of Science Dynamics Corporation into which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Science
Dynamics Corporation with full power of substitution in the
premises.
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Transferees
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Address
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Percentage
Transferred
|
Number
Transferred
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Dated:
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||||
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(Signature
must conform to name of holder as specified on the face of the
Warrant)
|
||||
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Address:
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||||
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SIGNED
IN THE PRESENCE OF:
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(Name)
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ACCEPTED
AND AGREED:
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[TRANSFEREE]
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(Name)
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B-1