THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON SHARES 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 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO SCIENCE DYNAMICS CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 72,727 Shares of Common
Stock of Science Dynamics Corporation (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2001-3 Issue Date: May ___, 2001
SCIENCE DYNAMICS CORPORATION, a corporation organized under the laws
of the State of Delaware (the "Company"), hereby certifies that, for value
received, KESHET L.P., or assigns, is entitled, subject to the terms set
forth below, to purchase from the Company 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 five (5) years after such date (the "Expiration Date"),
up to 72,727 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $.01 par value per share, of the Company, at a
purchase price of $1.4339 per share (such purchase price per share as
adjusted from time to time as herein provided is referred to herein as the
"Purchase Price"). The number and character of such shares of Common Stock
and the Purchase Price 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 (a) the Company's Common
Stock, $.01 par value per share, as authorized on the date of the
Subscription Agreement referred to in Section 9 hereof, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even if the right so to vote has been suspended by the happening of such a
contingency) and (c) any other securities into which or for which any of
the securities described in (a) or (b) 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.
-1-
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and
after the date hereof through and including the Expiration Date, the holder
hereof shall be entitled to receive, upon exercise of this Warrant in whole
in accordance with the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, shares of Common Stock
of the Company, subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full
by the holder hereof by delivery of an original or fax copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such holder and surrender of the original Warrant within seven
days of exercise, to the Company at its principal office or at the office
of its Warrant agent (as provided hereinafter), accompanied by payment, in
cash, wire transfer, or by certified or official bank check payable to the
order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price (as hereinafter defined) then in effect.
1.3. Partial Exercise. This Warrant may be exercised in
part (but not for a fractional share) by surrender of this Warrant in the
manner and at the place provided in subsection 1.2 except that the amount
payable by the holder on such partial exercise shall be the amount obtained
by multiplying (a) the number of shares of Common Stock designated by the
holder in the Subscription Form by (b) the Purchase Price then in effect.
On any such partial exercise, the Company, at its expense, will forthwith
issue and deliver to or upon the order of the holder hereof a new Warrant
of like tenor, in the name of the holder hereof or as such holder (upon
payment by such holder of any applicable transfer taxes) may request, the
number of shares of Common Stock for which such Warrant may still be
exercised.
1.4. Fair Market Value. Fair Market Value of a share of
Common Stock as of a particular date (the "Determination Date") shall mean
the Fair Market Value of a share of the Company's Common Stock. Fair Market
Value of a share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") National Market System or the NASDAQ
SmallCap Market, 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
an exchange or on the NASDAQ National Market System or the NASDAQ SmallCap
Market but is traded in the over-the-counter market, then the mean 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 standing 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 all of the Warrants are outstanding at the
Determination Date.
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1.5. 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.
1.6. Trustee for Warrant Holders. In the event that a bank
or trust company shall have been appointed as trustee for the holders of
the Warrants 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.
2.1 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 hereof 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 as
aforesaid. As soon as practicable after the exercise of this Warrant in
full or in part, and in any event within 7 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 hereof,
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. Cashless Exercise.
(a) Payment may be made either in (a) cash or by certified
or official bank check payable to the order of the Company equal to the
applicable aggregate Purchase Price, (ii) by delivery of Warrants, Common
Stock and/or Common Stock receivable upon exercise of the Warrants in
accordance with Section (b) below, or (iii) by a combination of any of the
foregoing methods, for the number of Common Shares specified in such form
(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.
(b) Notwithstanding any provisions herein to the contrary,
if the Fair Market Value of one share of Common Stock is greater than the
Purchase Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, upon consent of the Company, the holder
may elect to receive shares equal to the value (as determined below) of
this Warrant (or the portion thereof being cancelled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Subscription Form in which event the Company shall issue to the
holder a number of shares of Common Stock computed using the following
formula:
X=Y (A-B)
---
A
--------
Where X= the number of shares of Common Stock to be issued to the holder
-3-
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= Purchase Price (as adjusted to the date of such calculation)
3. Adjustment for Reorganization, Consolidation, Merger, etc.
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, prior to such dissolution, shall at its
expense deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the holders of
the Warrants after the effective date of such dissolution pursuant to this
Section 3 to a bank or trust company having its principal office in New
York, NY, as trustee for the holder or holders of the Warrants.
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 transaction described in this Section 3, then only in
such event will the Company's securities and property (including cash,
where applicable) receivable by the holders of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.
3.4. Share Issuance. Except for the Excepted Issuances as
described in Section 11 of the Subscription Agreement, if the Company at
any time shall issue any shares of Common Stock prior to the complete
exercise of this Warrant for a consideration less than the Purchase Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Purchase Price shall be reduced as
-4-
follows: (i) the number of shares of Common Stock outstanding immediately
prior to such issue shall be multiplied by the Purchase Price in effect at
the time of such issue and the product shall be added to the aggregate
consideration, if any, received by the Company 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 Purchase
Price. For purposes of this adjustment, the issuance of any security of
the Company 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 Purchase Price upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights.
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 Purchase Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then
Purchase 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 Purchase Price then in effect. The Purchase 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 increased 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 Purchase Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
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 Warrants, 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 Purchase 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).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep
available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to
time issuable on the exercise of the Warrant. This Warrant entitles the
holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's
Common Stock.
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") with
respect to any or all of the Shares. 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, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes) will issue and
-5-
deliver to or on the order of the Transferor thereof a new Warrant or
Warrants 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.
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.
9. Subscription Agreement. This Warrant is issued pursuant to a
Subscription Agreement entered into by the Company and Subscribers of the
Company's 8% Convertible Notes at or prior to the issue date of this
Warrant. The terms of the Subscription Agreement are incorporated herein
by this reference.
10. Maximum Exercise. The Holder shall not be entitled to
exercise this Warrant on an exercise date, in connection with that number
of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates on an exercise date, and (ii) the number of shares of Common
Stock issuable upon the exercise of this Warrant with respect to which the
determination of this proviso is being made on an exercise date, which
would result in beneficial ownership by the Holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock of the Company on
such date. For the purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall
not be limited to aggregate exercises which would result in the issuance of
more than 4.99%. The restriction described in this paragraph may be
revoked upon 75 days prior notice from the Holder to the Company. The
Holder may allocate which of the equity of the Company deemed beneficially
owned by the Subscriber shall be included in the 4.99% amount described
above and which shall be allocated to the excess above 4.99%.
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.
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.
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.
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 construed and
enforced in accordance with and governed by the laws of New York. Any
dispute relating to this Warrant shall be adjudicated in New York State.
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.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
-7-
IN WITNESS WHEREOF, the Company has executed this Warrant under seal
as of the date first written above.
SCIENCE DYNAMICS CORPORATION
By:________________________________
Witness:
______________________________
-8-
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Science Dynamics Corporation
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
___ 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 purchase 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):
___ $__________ in lawful money of the United States; and/or
___ 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
___ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2, to
exercise this Warrant with respect to the maximum number of shares of
Common Stock purchaseable pursuant to the cashless exercise procedure set
forth in Section 2.
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.
Dated:_________________ ______________________________________
(Signature must conform to name of
holder as specified on the face of the
Warrant)
_____________________________________
(Address)
-9-
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 to 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.
Transferees Percentage Number
Transferred Transferred
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Dated: ______, _____ ________________________________________
(Signature must conform to name of
holder as specified on the face of the
warrant)
Signed in the presence of:
_____________________________ ________________________________________
(Name) (address)
________________________________________
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
_________________________________
(Name)
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