OMNIBUS AMENDMENT AND WAIVER
This
OMNIBUS AMENDMENT AND WAIVER (this “Amendment”),
dated
as of September 18, 2006, is entered into by and between SCIENCE DYNAMICS
CORPORATION, a Delaware corporation (the “Company”), and
LAURUS MASTER FUND, LTD., a Cayman Islands company (“Laurus”),
for
the purpose of amending and amending and restating and waiving certain terms
of
(i) the Amended and Restated Secured Convertible Term Note, issued as of
February 11, 2005 and amended and restated as of July 21, 2006 (as amended
and
restated, amended, modified and supplemented from time to time,
the “Term
Note”)
by the
Company to Laurus, (ii) the Securities Purchase Agreement, dated as of February
11, 2005 (as amended, modified or supplemented from time to time, the
“Purchase
Agreement”)
by and
between the Company and Laurus, (iii) the Common Stock Purchase Warrant, issued
as of February 11, 2005 by the Company to Laurus (as amended and restated,
amended, modified and supplemented from time to time, the “Initial
Warrant”),
(iv)
the Common Stock Purchase Warrant, issued as of November 18, 2005 by the Company
to Laurus (as amended and restated, amended, modified and supplemented from
time
to time, the “Additional
Warrant”)
and
(v) the Forbearance Agreement, dated as of July 21, 2006 between the Company
and
Laurus (as amended, modified or supplemented from time to time, the
“Forbearance
Agreement”
and,
together with the Term Note, the Purchase Agreement, the Initial Warrant, the
Additional Warrant and each other Related Agreement as defined in the Purchase
Agreement, collectively, the “Documents”
and
each, a “Document”
).
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the applicable Term Note and Purchase Agreement as
applicable,
WHEREAS,
the Company has failed to pay to Laurus when due certain payments and principal
in respect of the Term Note as otherwise set forth in the Forbearance Agreement;
and
WHEREAS,
Laurus has agreed to waive on the terms and conditions set forth herein, the
Events of Default that may have occurred and are continuing as a result of
the
failure by the Company to pay to Laurus when due accrued interest and principal
in respect of the Term Note and, in consideration therefore and in consideration
of the other agreements set forth herein;
WHEREAS,
the Company and Laurus have agreed to make certain changes to the Term Note,
the
Initial Warrant, the Additional Warrant and the Purchase Agreement as set forth
herein;
WHEREAS,
the Company and Laurus have agreed that the Company shall redeem $500,000 in
principal amount of the Term Note; and
WHEREAS,
the
Company wishes to issue to Laurus a warrant in the form of Exhibit B hereto
(as
amended, modified and/or supplemented from time to time, the “September
2006 Warrant”)
in
exchange for $750,000 in principal amount of the Term Note, which warrant is
exercisable for up to 14,583,333 shares of the Company’s Common Stock (subject
to adjustment as set forth therein) upon the cashless exercise by the holder
thereof for an imputed exercise price of $0.01 per share in connection with
this
Amendment;
NOW,
THEREFORE, in consideration of the above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto agree as follows:
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WAIVER.
1. Upon
the
occurrence of the Amendment Effective Date (as defined below), Laurus
hereby waives each Event of Default that may have arisen under Section 4.1
of
the Term Note and Section 3 of the Forbearance Agreement solely as a result
of
the failure by the Company to pay Laurus the full amount of the August Repayment
(as defined in the Forebearance Agreement) on August 1, 2006.
PARTIAL
REDEMPTION OF THE TERM NOTE; EXCHANGE.
2. Pursuant
to the terms and conditions set forth in this Agreement, on the Amendment
Effective Date, (i) the Company shall redeem $500,000 in principal amount
of the Term Note (the “Redemption”)
by
remitting to Laurus via
wire
transfer in immediately available funds to an account designated in writing
by
Laurus, and (ii) Laurus
shall surrender to the Company, without any further consideration, the Term
Note
for cancellation of the $1,000,000 in principal amount outstanding thereunder
after giving effect to the Redemption in exchange for (the “Exchange”)
issuance by the Company of (x) the Second Amended and Restated Term Note in
the form attached hereto as Exhibit B in the principal amount of $250,000 and
(y) the September 0000 Xxxxxxx in the form attached hereto as Exhibit A
exercisable for up to 14,583,333 shares of Common Stock of the Company (subject
to adjustment as set forth therein), upon the cashless exercise by the holder
thereof for an imputed exercise price of $0.01 per share.
AMENDMENTS
3. Purchase
Agreement.
Upon
the occurrence of the Amendment Effective Date, the Purchase Agreement is hereby
amended as follows:
(i) Section
2(a) of the Purchase Agreement is hereby amended by inserting the following
sentence at the end thereof:
“The
Warrants issued by the Company to Laurus as of (i) November 18, 2005 exercisable
into 3,000,000 shares of Common Stock (as amended and restated, amended,
modified and supplemented from time to time, the “November 2005 Warrant”) and
(ii) September 18, 2006 exercisable into 14,583,333 shares of Common Stock
(as
amended and restated, amended, modified and supplemented from time to time,
the
“September 2006 Warrant”), shall each be deemed to be, together with the Warrant
issued on the Closing Date, a “Warrant” as otherwise defined herein and shall be
afforded all protections afforded a Warrant or Warrants as are set forth herein
and in the Related Agreements with respect to representations, warranties and
covenants of the Company.”
(ii) All
references in the Purchase Agreement to “Convertible Note” and “Convertible Term
Note” are hereby revised and replaced with the term “Term Note.”
(iii) All
references in the Purchase Agreement to the Note or the Term Note being
convertible into Common Stock of the Company, references to Common Stock
issuable upon conversion of the Note or the Term Note and similar references
are
hereby deleted.
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(iv) References
in Section 5.8(a) of the Purchase Agreement to “Common Stock” are hereby
deleted.
(v)
All
references in the Purchase Agreement to “Note Shares” are hereby
deleted.
(vi) Section
9
of the Purchase Agreement is hereby deleted in its entirety and replaced with
the following: “9. Reserved.”
MISCELLANEOUS
4. Amendment
Effective Date.
Each
amendment and waiver set forth herein shall be effective (the “Amendment
Effective Date”)
on the
first date upon which (i) each of the Company and Laurus shall have executed
and
the Company shall have delivered to Laurus its respective counterpart to this
Amendment, (ii) the Company shall have repaid (without prepayment penalty)
to
Laurus $500,000 of the outstanding Principal Amount under the Term Note to
effect the Redemption, (iii) the Company shall have executed before a witness,
witnessed and delivered to Laurus the Second Amended and Restated Term Note,
(iv) the Company shall have executed before a witness, witnessed and delivered
to Laurus the Amended and Restated Initial Warrant (as defined in, and attached
as an exhibit to, the Forebearance Agreement), (v) the Company shall have
executed before a witness, witnessed and delivered to Laurus the Amended and
Restated Additional Warrant (as defined in, and attached as an exhibit to,
the
Forebearance Agreement), (vi) the Company shall have executed before a witness,
witnessed and delivered to Laurus the September 2006 Warrant, (vii) Laurus
shall
have delivered to the Company the Term Note for cancellation in exchange for
the
Second Amended and Restated Term Note and the September 2006 Warrant, and (viii)
Laurus shall have delivered to the Company a proxy granting the Company the
voting rights in respect of the Common Stock issuable upon exercise of the
September 0000 Xxxxxxx in the form attached hereto as Exhibit
C.
5. Acknowledgement
of Outstanding Indebtedness.
Upon
consummation of the transactions contemplated under this Amendment, including,
without limitation, the Redemption and the Exchange, Laurus hereby acknowledges
and agrees that, as of such date after giving effect to such transactions,
the
outstanding principal amount of the Term Note shall equal $250,000 and the
outstanding accrued and unpaid interest in respect of the Term Note as of the
date hereof shall equal $41,093.75. Except as set forth in the preceding
sentence, Laurus acknowledges and agrees that there is no other outstanding
indebtedness due to Laurus or any affiliate of Laurus from the
Company.
6. Representations,
Warranties and Covenants.
The
Company hereby represents and warrants to Laurus that after giving effect to
this Amendment: (i) on the date hereof, all representations, warranties and
covenants made by the Company in connection with the Documents (including,
without limitation, in respect of the Amended and Restated Initial Warrant
(as
defined in the Forebearance Agreement), the Amended and Restated Additional
Warrant (as defined in the Forebearance Agreement) and the September 0000
Xxxxxxx) are true, correct and complete; and (ii) on the date hereof, all of
the
Company’s covenant requirements set forth in the Documents have been
met.
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7. No
Waiver of Other Defaults.
Upon
the occurrence and during the continuance of any further Events of Default
that
may occur after date of this Agreement, Laurus may, at its election, exercise
any rights and remedies authorized by the Documents and/or applicable law.
Laurus’ rights and remedies under the Documents shall be cumulative. Laurus
shall have all other rights and remedies not inconsistent herewith or therewith
as provided by law or in equity. No exercise by Laurus of one right or remedy
shall be deemed an election, and no waiver by Laurus of any Event of Default
on
the part of the Company shall be deemed a continuing waiver. No delay by Laurus
shall constitute a waiver, election, or acquiescence by it.
8. Further
Assurances.
The
Company will take such other actions as Laurus may reasonably request from
time
to time to accomplish the objectives of this Agreement.
9. Registration
Rights.
If at
any time after the date hereof there is not an effective registration statement
covering the shares of Common Stock of the Company issuable upon exercise of
the
Amended and Restated Initial Warrant (as defined in the Forebearance Agreement),
the Amended and Restated Additional Warrant (as defined in the Forebearance
Agreement) or the September 2006 Warrant (collectively, the “Shares”)
and
the Company shall determine to prepare and file with the Securities and Exchange
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of 1933, as amended (the
“Securities
Act”),
of
any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any
entity or business or equity securities issuable in connection with a stock
option or other employee benefit plans, then the Company shall include in such
registration statement all of such Shares to the extent the Company may do
so
without violating registration rights of others which exist as of the date
of
this Agreement, subject to customary underwriter cutbacks applicable to all
holders of registration rights.
The
Company’s registration obligations pursuant to this paragraph shall continue
until the earlier of: (a) the date when all of the Shares have been sold
publicly by Laurus pursuant to an effective registration statement; or (b)
the
date when all of the Shares may be sold without restriction pursuant to Rule
144(k) under the Securities Act.
10. No
Other Changes.
Except
as specifically set forth in this Amendment, there are no other amendments,
modifications or waivers to the Term Notes, Purchase Agreements or Reg. Rights
Agreements, and all of the other forms, terms and provisions of the Term Notes
and the Purchase Agreements remain in full force and effect.
11. Limited
References.
From
and after the Amendment Effective Date, all references to the Term
Note, the
Purchase Agreement, the Initial Warrant and the Additional Warrant shall be
deemed to be references to the Term Note, the Purchase Agreement, the Initial
Warrant and the Additional Warrant as modified hereby.
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12. Governing
Law; Assignments; Counterparts.
This
Amendment shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns. THIS
AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE
LAW OF THE STATE OF NEW YORK.
This
Amendment may be executed in any number of counterparts, each of which shall
be
an original, but all of which shall constitute one instrument.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF,
each of
the Company and Laurus has caused this Amendment to be signed in its name
effective as of this 18th
day of
September 2006.
| SCIENCE DYNAMICS CORPORATION | ||
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| By: | ||
| Name: |
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| Title: | ||
| LAURUS MASTER FUND, LTD. | ||
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| By: | ||
| Name: |
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| Title: | ||
7
EXHIBIT
A
SEPTEMBER
2006 WARRANT
8
EXHIBIT
B
AMENDED
AND RESTATED TERM NOTE
9
EXHIBIT
C
IRREVOCABLE
PROXY
10
