REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into as of
__ day of September, 2006 by and among Science Dynamics Corporation, a Delaware
corporation (the “Company”), and the shareholders of the company listed on
Schedule I hereto the (each and “RTI Shareholder” and collectively, the “RTI
Shareholders” )
PRELIMINARY
STATEMENT
The
Company and Xxxxxxxxx Technologies, Inc., a Virginia corporation (“RTI”), and
the RTI Shareholders, are entering into a Stock Purchase Agreement, dated
September __, 2006 and as amended from time to time (the “Purchase Agreement”),
whereby RTI Shareholders will receive a combination of cash, promissory notes,
Series B redeemable convertible preferred stock (the “Preferred Stock”) and
common stock, par value $.01 per share (“Common Stock”), of the Company;
Simultaneously
with, and as a condition to, the closing of the transactions contemplated in
the
Purchase Agreement, the Company and certain of the RTI Shareholders desire
to
enter into this Agreement to provide certain registration rights with respect
to
the Common Stock held by, or issuable upon conversion of the Preferred Stock,
issuable to the RTI Shareholders; and
NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements, and subject to the terms and conditions herein contained, the
parties hereto hereby agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER; LOCKUP
1.1.
Supersedes
Other Agreements.
This
Agreement, to the extent that it is inconsistent with any other instrument
or
understanding among the parties governing the affairs of the Company, shall
supersede such instrument or understanding to the fullest extent permitted
by
law. A copy of this Agreement shall be filed at the Company’s principal
office.
1.2
Definitions. Unless
otherwise defined herein, capitalized terms shall have the following meanings:
“1933
Act” shall mean the Securities Act of 1933, as amended.
“Commission”
shall mean the Securities and Exchange Commission.
“Group
A
Shareholders” shall mean Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx and Xxxxx
Xxxxx.
“Group
B
Shareholders” shall mean any Shareholders who are parties to this Agreement
other than Group A Shareholders.
“Person”
shall mean any individual, corporation, partnership, limited liability company,
firm, joint venture, association, joint stock company, trust, unincorporated
organization, governmental or regulatory body or subdivision thereof or other
entity.
“Registration
Expenses” shall mean all expenses incident to the Company’s performance of or
compliance with its obligations under this Agreement, including, without
limitation, all registration, filing, listing, stock exchange and NASD fees,
all
fees and expenses of complying with state securities or blue sky laws (including
fees, disbursements and other charges of counsel for the underwriters only
in
connection with blue sky filings), all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees, disbursements and other
charges of counsel for the Company and of its independent public accountants,
including the expenses incurred in connection with “cold comfort” letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by the issuer of securities,
but
excluding from the definition of Registration Expenses underwriting and
discounts and brokerage commissions and applicable transfer taxes, if any,
or
legal and other expenses incurred by any sellers, which discounts, commissions,
transfer taxes and legal and other expenses shall be borne by the seller or
sellers of Registrable Securities in all cases.
1.3
Restriction
on Sale of Stock.
For the
two-year period beginning on the date hereof (the “Lockup Period”), each Group A
Shareholder agrees that such Group A Shareholder shall not, directly or
indirectly, sell in the public market, or grant an option to sell in the public
market any shares of the Company’s common stock that is as of the date hereof or
becomes beneficially owned by them. Without limiting the generality of the
foregoing, the Group A Shareholders agree not to directly or indirectly offer
to
sell, grant an option for the purchase or sale of, transfer, pledge assign,
hypothecate, distribute or otherwise encumber or dispose of any securities
in
the Company unless the transferee first agrees to be bound by the provisions
of
this Section 1.3. In order to enable the aforesaid covenants to be enforced,
each Group A Shareholder hereby consents to the placing of legends and/or
stop-transfer orders with the transfer agent on any of the Restricted
Securities.
ARTICLE
II
DEMAND
REGISTRATION RIGHTS
2.1.
Registrable
Securities.
The term
“Registrable Securities” shall mean and include the shares of Common Stock of
that are (i) issuable upon the conversion of the Preferred Stock and (ii) issued
pursuant to the Purchase Agreement. As to any particular Registrable Securities,
such securities will cease to be Registrable Securities when (a) they have
been
effectively registered under the 1933 Act and disposed of in accordance with
the
registration statement covering them, (b) they are or may be freely tradable
pursuant to Rule 144 (“Rule 144”)under the 1933 Act (or any similar provisions
that are then in effect), or (c) they have been otherwise transferred and new
certificates for them not bearing a restrictive legend have been issued by
the
Company and the Company shall not have “stop transfer” instructions against
them. For the purposes of this Section 2.1(b), if the number of shares of
Registrable Securities that can be sold by a Group A or Group B Shareholder
pursuant to Rule 144 is no greater than the number of shares that can be sold
pursuant to subsection (e) (1) (i) of Rule 144, such shares shall be deemed
freely tradable pursuant to Rule 144.
2.2.
Demand Registration.
Subject
to the limitations of Section 2.3, at any time following the termination of
the
Lockup Period, Group A Shareholders holding not less than forty percent (40%)
of
the Registrable Securities may request the registration under the 1933 Act
of
all or part of their Registrable Securities then outstanding (a “Demand
Registration”). Subject to the conditions of Section 3, the Company shall use
its commercially reasonable efforts to file such registration statement under
the 1933 Act within sixty (60) days after the date any such request is received
by the Company, and to cause such registration statement to be declared
effective; provided, however, that if the request is made during the last forty
five (45) days of the Company’s fiscal year, the Company shall not be required
to file the registration statement until five (5) business days after the
Company’s Form 10-KSB is filed with the Commission. The Company shall notify the
RTI Shareholder promptly when any such registration statement has been declared
effective. The Company shall not be required to file more than one registration
statement pursuant to this Section 2.2, and shall not be required to keep the
registration statement effective for more than nine (9) months after the
effective date thereof, provided, however, in the event a registration statement
filed pursuant to this Section ceases to be effective for more than 20 days,
in
the aggregate, such nine month period shall be extended by one day for each
day
such registration statement is not effective. In the event that at the time
the
request for registration under this Section 2.2 is made, the Company is eligible
to use a Registration Statement on Form S-3, or other similar form which the
Company can use, to permit a public offering and resale of the Registrable
Securities under the Securities Act on a continuous basis under Rule 415, the
Company shall be required to keep such registration statement effective for
at
least twelve (12) months after the effectiveness thereof. If more than eighty
percent (80%) of the Registrable Securities held by the Group A Shareholders
have been registered or sold, the Company’s obligations under this Article II
shall terminate.
2
2.3.
Registration
Statement Form.
Registrations under Section 2.2 shall be on the appropriate registration form
of
the Commission as shall permit the disposition of such Registrable Securities
in
accordance with the intended method or methods of disposition specified in
the
Registration Statement; provided, however, such intended method of disposition
shall not include an underwritten offering of the Registrable
Securities.
2.4.
Expenses.
The
Company will pay all Registration Expenses in connection with any registration
required under Sections 2.2.
2.5.
Effective
Registration Statement.
(a) The
Company’s obligations to file a registration statement and to keep the
registration statement effective pursuant to Section 2.2, may be delayed for
an
Excused Reason. An Excused Reason shall mean the occurrence of negotiations
with
respect to material agreements prior to the announcement of the execution of
the
agreement or the termination of the negotiations and other similar material
corporate events to which the Company is a party or expects to be a party if,
in
the reasonable judgment of the Company, disclosure of the negotiations or other
event would be adverse to the best interests of the Company provided that the
Company is continuing to treat such negotiations as confidential and provided
further that the period during which the Company is precluded from filing the
registration statement (or suspended the use of an effective registration
statement) as a result thereof has not exceeded forty five (45) days in the
aggregate and provided further that the Company shall not be permitted to avoid
filing a registration statement (or to suspend the use of an effective
registration statement) for an Excusable Reason more than once in any twelve
month period. (b) A registration requested pursuant to Section 2.2 shall not
deemed to have been effected unless a registration statement with respect
thereto has become effective, provided that a registration which does not become
effective after the Company filed a registration statement with respect thereto
solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel
in
the form of a letter signed by such counsel and provided to the Company relating
to a disclosure matter unrelated to such holder) shall be deemed to be have
been
effected by the Company.
2.6.
Plan
of Distribution.
The
Company hereby agrees that a registration statement filed pursuant to this
Agreement shall include a plan of distribution which sets forth the proposed
method of distribution by the RTI Shareholders which section shall be approved
in writing by the RTI Shareholders. The RTI Shareholders shall not sell or
otherwise distribute shares of Common Stock pursuant to the registration
statement except as set forth in such plan of distribution. Notwithstanding
the
foregoing, the RTI Shareholders shall not sell shares of Common Stock pursuant
to an underwritten offering without the approval of the Company.
3
ARTICLE
III
INCIDENTAL
REGISTRATION RIGHTS
3.1.
Right
To Include (“Piggy-Back”) Registrable Securities.
Provided that the Registrable Securities beneficially owned by the Group B
Shareholders have not been registered, if at any time after the date hereof
but
before the second anniversary of the date hereof, and for Group A Shareholders,
if at any time during the twelve months following the expiration of the Lockup
Period, the Company proposes to register any of its securities under the 1933
Act (other than by a registration in connection with an acquisition in a manner
which would not permit registration of Registrable Securities for sale to the
public, on Form S-8, or any successor form thereto, on Form S-4, or any
successor form thereto and other than pursuant to Section 2), on a
firm-commitment underwritten basis, then, the Company will each such time give
prompt written notice to all RTI Shareholders holding Registrable Securities
of
its intention to do so and of such RTI Shareholders rights under this
Section
3.1.
Upon
the written request of any RTI Shareholders who hold Registrable Securities
made
within ten (10) days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such holders
of
Registrable Securities and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, use its commercially
reasonable efforts to effect the registration under the 1933 Act of the
Registrable Securities held by such RTI Shareholders, to the extent requisite
to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of such Registrable Securities so to be registered, by inclusion
of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any
time
after written notice of its intention to register any securities and prior
to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each RTI Shareholder who is holding
Registrable Securities and who has requested to be included in such registration
statement and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities
in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however,
to
the rights of the Group A Shareholders entitled to do so to request that such
registration be effected as a registration under Article II, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
3.1 shall relieve the Company of its obligation to effect any registration
upon
request by the Group A Shareholders under Article II except to the extent that
any Registrible Securities are registered pursuant to such registration
Statement. The Company will pay all Registration Expenses in connection with
the
registration of Registrable Securities held by Group A and Group B Shareholders
requested pursuant to this Section 3.1.
3.2.
Priority In Incidental Registrations.
If the
managing underwriter of the underwritten offering contemplated by this Section
3
shall inform the Company and holders of the Registrable Securities requesting
such registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can
be
sold in such offering then the Company will include in such registration, to
the
extent of the number which the Company is so advised can be sold in such
offering, (i) first securities proposed by the Company to be sold for its own
account,(ii) second securities acquired pursuant to that certain Securities
Purchase Agreement between the Company and Xxxxxx Partners LP; (iii) third
securities held by holders having demand registration rights and exercising
such
rights in connection with such registration statement and (iv) fourth securities
held by Group A and Group B Shareholders holding Registrable Securities and
securities of other selling security holders who requested to be included in
such registration on a pro rata basis.
4
ARTICLE
IV
REGISTRATION
PROCEDURES
4.1.
Registration
Procedures.
If and
whenever the Company is required to effect any registration under the 1933
Act
this Agreement, the Company shall, as expeditiously as possible:
(a) Prepare
and file with the Commission the requisite registration statement to effect
such
registration and thereafter use its commercially reasonable efforts to cause
such registration statement to become effective; provided, however, that the
Company may discontinue any registration of its securities that are not shares
of Registrable Securities (and, under the circumstances specified in Section
3
of this Agreement, its securities that are shares of Registrable Securities)
at
any time prior to the effective date of the registration statement relating
thereto;
(b) notify
each seller of Registrable Securities and other securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the
circumstances under which they were made, prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by such registration statement until such time as all of
such
Registrable Securities has been disposed of in accordance with the method of
disposition set forth in such registration statement;
(c) before
filing any registration statement or prospectus or any amendments or supplements
thereto, furnish to and afford the holders of the Registrable Securities, if
requested in writing by the holders of the Registrable Securities, one firm
of
counsel for the holders of Registrable Securities designated by the holders
of a
majority of Registrable Securities to be included in the registration statement,
(the “Holders Counsel”) a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed. The Company shall not
file any registration statement or prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority of
the
shares of Registrable Securities covered by such registration statement, the
Holders Counsel, shall reasonably object. Any registration statement, when
declared effective by the Commission or when subsequently amended (by an
amendment which is declared effective by the Commission) or any prospectus
in
the form included in the registration statement as declared effective by the
Commission or when subsequently supplemented will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) use
its
commercially reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness of a registration statement, and in any event
shall, within thirty (30) days of such cessation of effectiveness, use its
commercially reasonable efforts to amend the registration statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional registration statement pursuant
to
Rule 415 covering all of the Registrable Securities and use its commercially
reasonable efforts to cause the subsequent registration statement to be declared
effective as soon as practicable after such filing and to remain effective
as
provided in this Agreement;
5
(e) furnish
to each seller of Registrable Securities covered by such registration statement
such number of copies of such drafts and final conformed versions of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits and any documents incorporated by reference),
such number of copies of such drafts and final versions of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the 1933 Act, in conformity with the requirements of the 1933 Act, and such
other documents, as such seller may reasonably request in writing, provided,
however, that the RTI Shareholders shall not distribute or otherwise use any
preliminary prospectus in connection with any sale or distribution of the
registered Registrable Securities;
(f) use
its
commercially reasonable efforts (i) to register or qualify all Registrable
Securities under such other securities or blue sky laws of such states or other
jurisdictions of the United States of America as the sellers of Registrable
Securities covered by such registration statement shall reasonably request
in
writing, (ii) to keep such registration or qualification in effect for so long
as such registration statement remains in effect, (iii) to prevent the issuance
of any order suspending the effectiveness of a registration statement or of
any
order preventing or suspending the use of a prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, and, if any such order is issued,
to
use its commercially reasonable efforts to obtain the withdrawal of any such
order at the earliest possible moment, and (iv) to take any other action that
may be reasonably necessary or advisable to enable such sellers to consummate
the disposition in such jurisdictions of the securities to be sold by such
sellers, except that the Company shall not for any such purpose be required
to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Section 4.1(f) be
obligated to be so qualified, to subject itself to taxation in such jurisdiction
or to consent to general service of process in any such
jurisdiction;
(g) use
its
commercially reasonable efforts to cause all Registrable Securities and other
securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities
as
may be necessary in the opinion of counsel to the Company to enable the seller
or sellers thereof to consummate the disposition of such Registrable Securities
in the manner set forth in the registration statement;
(h) otherwise
comply with all applicable rules and regulations of the Commission and any
other
governmental agency or authority having jurisdiction over the offering, and
make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158
promulgated thereunder, and furnish to each seller of Registrable Securities
at
least ten days prior to the filing thereof a copy of any amendment or supplement
to such registration statement or prospectus.
4.2
The
Company may require, as a condition to the inclusion of each holder of
Registrable Securities in a registration statement, that such holder furnish
the
Company such information regarding such holder of Registrable Securities and
the
distribution of such securities as the Company may from time to time reasonably
request in writing, including (a) furnishing the information as to any shares
of
Common Stock or other securities of the Company owned by the holder, the
holder’s proposed plan of distribution, any relationship between the holder and
the Company and any other information which the Company reasonably requests
in
connection with the preparation of the registration statement and update such
information immediately upon the occurrence of any events or condition which
make the information concerning the Seller inaccurate in any material respect;
(b) an agreement not to sell any Registrable Securities pursuant to the
registration statement except in the manner set forth in the Registration
Statement; (c) an agreement to comply with the prospectus delivery requirements
and the provisions of Regulation M of the Commission pursuant to the 1933 Act
to
the extent that such regulation is applicable to the holder; (d) an agreement
not to sell or otherwise transfer or distribute any Registrable Securities
if
the holder possesses any material nonpublic information concerning the
Company.
6
4.4
Removal
of Shares from Registration Statement.
In the
event the any Registration Statement (the “Original Registration Statement”)
filed pursuant to this Agreement will not be declared effective due to comments
from the Securities and Commission the Company in its sole reasonable discretion
may remove from Registration Statement all or any portion of the number of
shares of the RTI Shareholders’ shares of Registrable Securities from such
Original Registration Statement as the Company in its reasonable discretion
deems appropriate; provided any such shares of Registrable Securities that
are
removed from a Registration Statement pursuant to this Section shall be included
on a Registration Statement which the Company shall file no later than 30 days
after the Original Registration Statement is declared effective by the
Securities and Exchange Commission.
ARTICLE
V
UNDERWRITTEN
OFFERINGS
5.1.
Incidental
Underwritten Offerings.
If the
Company at any time proposes to register any of its securities under the 1933
Act as contemplated by Section 3.1 and such securities are to be distributed
by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 3.1 and subject to
the
provisions of Section 3.2, use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be
offered and sold by such holder among the securities to be distributed by such
underwriters. In no event shall any RTI Shareholder be deemed an underwriter
for
purposes of this Agreement. This Article V shall not apply to any Registrable
Securities theretofore registered pursuant to Article II of this Agreement.
5.2.
Participation In Underwritten Offerings.
No
holder of Registrable Securities may participate in any underwritten offering
under Section 3.1 unless such holder of Registrable Securities (i) agrees to
sell such Person’s securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers
of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement
in
connection with such offering) shall require any holder of Registrable
Securities to make a representation or warranty to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder of Registrable Securities expressly for
use in the related registration statement or representations, warranties or
agreements regarding such holder of Registrable Securities, such holder’s
Registrable Securities and such holder’s intended method of distribution and any
other representation required by law.
7
ARTICLE
VI
INDEMNIFICATION
6.1.
Indemnification by the Company.
In the
event of any registration of any securities of the Company under the 1933 Act,
the Company will, and hereby does agree to indemnify and hold harmless the
holder of any Registrable Securities covered by such registration statement,
its
directors and officers, each other Person who participates as an underwriter
in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the 1933
Act
against any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or underwriter or controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced
or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Company
will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred
by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability,
(or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof
and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the 1933 Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person’s failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
1933 Act to the Person asserting the existence of an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an amendment
or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any
such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
8
6.3.
Notices
Of Claims, Etc.
Promptly after receipt by an indemnified party of notice of the commencement
of
any action or proceeding involving a claim referred to in Sections 6.1 and
Section 6.2, such indemnified party will, if claim in respect thereof is to
be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party
of
its obligations under Sections 6.1 and Section 6.2, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In
case any such action is brought against an indemnified party, unless in such
reasonable judgment of counsel to the indemnified party, a conflict of interest,
as hereinafter defined, between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the indemnifying
party
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter
into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability, or a covenant not to xxx, in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
If the defendants in any action covered by this Section 6.3 include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available to
the
indemnifying party or if the interests of the indemnified party reasonably
may
be deemed to conflict with the interests of the indemnifying party
(collectively, a “conflict of interest”), the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party. Such counsel
shall be selected by the holders of a majority of the shares of Common Stock
having an indemnity claim against the Company, whether pursuant to this
Agreement or any other agreements which provide such or similar
indemnity.
9
6.4.
Other
Indemnification. Indemnification
similar to that specified in Sections 6.1 and Section 6.2 (with appropriate
modifications) shall be given by the Company and each holder of Registrable
Securities (but only if and to the extent required pursuant to the terms herein)
with respect to any required registration or other qualification of securities
under any Federal or state law or regulation of any governmental authority,
other than the 1933 Act.
6.5.
Indemnification
Payments.
The
indemnification required by Sections 6.1 and Section
6.2 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
6.6.
Contribution.
(i)
If
the indemnification provided for in Sections 6.1 and Section 6.2 is unavailable
to an indemnified party in respect of any expense, loss, claim, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the holder of
Registrable Securities or underwriter, as the case may be, on the other from
the
distribution of the Registrable Securities or (ii) if the allocation provided
by
clause (i) above is not permitted by applicable law, in such proportion as
is
appropriate to reflect not only the relative benefits referred to in clause
(i)
above but also the relative fault of the Company on the one hand and of the
holder of Registrable Securities or underwriter, as the case may be, on the
other in connection with the statements or omissions which resulted in such
expense, loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder of Registrable Securities or underwriter, as the case may be,
on
the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by the Company from the initial sale of the Registrable Securities by the
Company to the purchasers bear to the gain, if any, realized by all selling
holders participating in such offering or the underwriting discounts and
commissions received by the underwriter, as the case may be. The relative fault
of the Company on the one hand and of the holder of Registrable Securities
or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the holder of Registrable Securities or by the
underwriter and the parties’ relative intent, knowledge, access to information
supplied by the Company, by the holder of Registrable Securities or by the
underwriter and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, provided
that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such indemnified
party by reason of the provisions contained herein, and in no event shall the
obligation of any indemnifying party to contribute under this Section 6.6 exceed
the amount that such indemnifying party would have been obligated to pay by
way
of indemnification if the indemnification provided for hereunder had been
available under the circumstances.
10
(iii)
Notwithstanding the provisions of this Section 6.6, no holder of Registrable
Securities or underwriter shall be required to contribute any amount in excess
of the amount by which (i) in the case of any such holder, the net proceeds
received by such holder from the sale of Registrable Securities in the
applicable Registration Statement or (ii) in the case of an underwriter, the
total price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount
of any damages that such holder or underwriter has otherwise been required
to
pay by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
ARTICLE
VII
MISCELLANEOUS
7.1.
Amendments
And Waivers.
This
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of fifty-one percent (51%) or more
of
the Registrable Securities outstanding at such time. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound
by
any consent authorized by this Section 7.1, whether or not such Registrable
Securities shall have been marked to indicate such consent.
7.2.
Nominees
For Beneficial Owners.
In the
event that any Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof shall be treated as the holder
of
such Registrable Securities for purposes of any request or other action by
any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by a holder or holders of Registrable Securities contemplated by this
Agreement. The Company may require assurances reasonably satisfactory to it
of
such owner’s beneficial ownership or such Registrable Securities.
7.3.
Notices.
Except
as
otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Purchase
Agreement or at such other address as such party shall have furnished to the
Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case
of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) upon receipt after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means (including, without limitation,
by
fax or air courier), when delivered at the address specified above, provided
that any such notice, request or communication shall not be effective until
received, and provided, further, that notice by fax shall not be deemed received
unless receipt is acknowledged.
11
7.4.
Assignment.
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit
of
and enforceable by any subsequent holder of any Registrable Securities. Each
of
the Holders of the Registrable Securities agrees, by accepting any portion
of
the Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of a representative (the
“RTI Shareholder’s Representative”) to act on behalf of such Holder pursuant to
the terms hereof which such actions shall be made in the good faith discretion
of the RTI Shareholder’s Representative and be binding on all persons for all
purposes.
7.5.
Descriptive Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
7.6.
Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to applicable principles of
conflicts of law.
7.7.
Jurisdiction.
If any
action is brought among the parties with respect to this Agreement or otherwise,
by way of a claim or counterclaim, the parties agree that in any such action,
and on all issues, the parties irrevocably waive their right to a trial by
jury.
Exclusive jurisdiction and venue for any such action shall be the State or
Federal Courts serving the City, County and State of New York. In the event
suit
or action is brought by any party under this Agreement to enforce any of its
terms, or in any appeal therefrom, it is agreed that the prevailing party shall
be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial
court, and/or appellate court if such party prevails on substantially all
disputed matters.
7.8.
Entire
Agreement.
This
Agreement, together with the Purchase Agreement, embodies the entire agreement
and understanding between the Company and each other party hereto relating
to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Each party to this Agreement represents that
it
has obtained all necessary waivers, consents and authorizations necessary to
execute this Agreement and consummate the transactions contemplated
hereby.
7.9.
Severability.
If any
provision of this Agreement, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
7.10.
Binding Effect.
All
the terms and provisions of this Agreement whether so expressed or not, shall
be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
7.11.
Preparation
of Agreement. This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
7.12.
Failure or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
12
7.13.
Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
13
IN
WITNESS WHEREOF, the RTI Shareholders and the Company have as of the date first
written above executed this Agreement.
| SCIENCE DYNAMICS CORPORATION | ||
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By:
Name:
Title:
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14
SCHEDULE
I
RTI
Shareholders
|
Name
and Address
of
Stockholder
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Common
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Series
B Preferred
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Xxxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxx
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Xxxxxxx
Xxxxxx
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Xxxxxxxx
Blue
|
||||
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Xxxxx
Xxxxx
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||||
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Xxxxx
Xxxxxxx
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||||
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Xxxxxxxxx
Devolite-Xxxxx
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||||
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Xxxxx
Xxxxx
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Xxxxxx
Xxxxxxx
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Xxxxxx
Xxxxxx
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Xxxxxx
Xxxxxxxx
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Xxxxxx
Xxxxxxxx
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Xxxxxxxx
Xxxxxxxxx
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||||
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Xxxx
Xxxxxxxxx
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||||
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Xxxxx
Xxxxxxxxx
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||||
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Xxxxxxx
Xxxxxxxxx
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Xxxxxxx
Xxxxxxxx
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Xxxxxx
Xxxxx
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Xxx
Xxxxx
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