SECURITIES PURCHASE AGREEMENT

BETWEEN

SCIENCE DYNAMICS CORPORATION
 
AND
 
BARRON PARTNERS LP

DATED

September 15, 2006
 

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SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made and entered into as
of the 15th day of September, 2006 between Science Dynamics Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
“Company”) and Barron Partners LP, a Delaware limited partnership (“Investor”).
 
RECITALS
 
WHEREAS, the Investor wishes to purchase from the Company, upon the terms and
subject to the conditions of this Agreement, for the Purchase Price as
hereinafter defined, (a) the Company’s convertible subordinated promissory note
(the “Note”) in the principal amount of four million five hundred thousand
dollars ($4,500,000), the Note to be in the form attached hereto as Exhibit A,
and (b) Common Stock Purchase Warrants (the “Warrants”) to purchase up to one
hundred twenty five million (125,000,000) shares of the Company’s common stock,
par value $.01 per share (“Common Stock”) at an exercise price of five cents
($.05) per share, and one hundred twenty five million (125,000,000) shares of
Common Stock at an exercise price of twelve and one-half cents ($.125) per
share. The Note will be convertible into shares of Series A Preferred Stock or
Common Stock, as such terms are hereinafter defined, in the manner set forth in
the Note; and
 
WHEREAS, pursuant to the RTI Agreement, as hereinafter defined, the Company is
acquiring Ricardi Technologies, Inc., a Virginia corporation (“RTI”) for
consideration consisting of fifty million (50,000,000) shares of Common Stock,
$3,500,000 in cash, a note in the principal amount of five hundred thousand
dollars ($500,000), and one million (1,000,000) shares of series B preferred
stock, par value $.01 per share (“Series B Preferred Stock”), which are
convertible into an aggregate of eight million three hundred thirty three
thousand three hundred thirty three (8,333,333) shares of Common Stock; and
 
WHEREAS, the parties intend to memorialize the terms on which the Company will
sell and the Investor will purchase the Note and Warrants.
 
NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby conclusively acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

ARTICLE I
 
INCORPORATION BY REFERENCE AND DEFINITIONS
 
1.1.
Incorporation by Reference. The foregoing recitals and the Exhibits and
Schedules attached hereto and referred to herein, are hereby acknowledged to be
true and accurate, and are incorporated herein by this reference.

 
1.2.
Supersedes Other Agreements. This Agreement, to the extent that it is
inconsistent with any other instrument or understanding among the parties, 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.

 
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1.3.
Certain Definitions. For purposes of this Agreement, the following capitalized
terms shall have the following meanings (all capitalized terms used in this
Agreement that are not defined in this Article 1 shall have the meanings set
forth elsewhere in this Agreement):

 
1.3.1. “4.9% Limitation” has the meaning set forth in Section 2.1.3 of this
Agreement.
 
1.3.2. “1933 Act” means the Securities Act of 1933, as amended.
 
1.3.3. “1934 Act” means the Securities Exchange Act of 1934, as amended.
 
1.3.4. “Affiliate” means a Person or Persons directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
the Person(s) in question. The term “control,” as used in the immediately
preceding sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50% of the voting
rights attributable to the shares of such controlled corporation and, with
respect to a Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such controlled Person.
 
1.3.5. “Bylaws” means the bylaws of the Company, as the same may be amended from
time to time.
 
1.3.6. “Certificate of Designation” means the certificate of the rights,
preferences and privileges, subject to the limitations, with respect to the
Series A Preferred Stock, pursuant to Article Fourth of the Certificate of
Incorporation. The Certificate of Designation shall be in substantially the form
of Exhibit B to this Agreement, subject to the provision of Section 6.5 of this
Agreement.
 
1.3.7. “Certificate of Incorporation” means the certificate of incorporation of
the Company, as the same may be amended from time to time.
 
1.3.8. “Change of Name” means the change of the Company’s corporate name to a
name which better reflects its business.
 
1.3.9. “Closing” means the consummation of the transactions contemplated by this
Agreement, all of which transactions shall be consummated contemporaneously with
the Closing.
 
1.3.10. “Closing Date” means the date on which the Closing occurs, which be not
later than September , 2006.
 
1.3.11. “Common Stock” means the Company’s common stock, which is presently
designated as the common stock, par value $.01 per share.
 
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1.3.12. “Company’s Governing Documents” means the Certificate of Incorporation
and Bylaws.
 
1.3.13. “Convertible Securities” means the Note and the Series A Preferred
Stock.
 
1.3.14. “Delaware Law” means the Delaware General Corporation Law.
 
1.3.15. “EBITDA” means consolidated earnings before interest, taxes,
depreciation and amortization, determined in accordance with GAAP.
 
1.3.16. “Escrow Agreement” means the Escrow Agreement among the Company, the
Investor and Sichenzia Ross Friedman Ference LLP, as Escrow Agent, attached
hereto as Exhibit C it being acknowledged that the Escrow Agent is counsel for
the Company.
 
1.3.17. “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers, directors of and consultants (other than
consultants whose services relate to the raising of funds) of the Company
pursuant to the any stock or option plan that was or may be adopted by a
majority of the independent members of the Board of Directors of the Company or
a majority of the members of a committee of independent directors established
for such purpose, (b) securities upon the exercise of or conversion of any
securities issued hereunder and pursuant to the Registration Rights Agreement,
the Note, the Warrants and the Certificate of Designation and any other options,
warrants or convertible securities which are outstanding on after completion of
the Closing, and (c) securities issued pursuant to acquisitions, licensing
agreements, or other strategic transactions, provided any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business which the Company’s board of directors believes is
beneficial to the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities.
 
1.3.18. “GAAP” means United States generally accepted accounting principles
consistently applied.
 
1.3.19. “Material Adverse Effect” means any adverse effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company and its subsidiaries, taken as a whole and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
material obligations under this Agreement or the Registration Rights Agreement
or to perform its obligations under any other material agreement.
 
1.3.20. “Person” means an individual, partnership, firm, limited liability
company, trust, joint venture, association, corporation, or any other legal
entity.
 
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1.3.21. “Preferred Stock” shall mean the preferred stock, par value $.01 of the
Company.
 
1.3.22. “Purchase Price” means the four million five hundred thousand dollars
($4,500,000) to be paid by the Investor to the Company for the Note and the
Warrants
 
1.3.23. “Registration Rights Agreement” means the registration rights agreement
between the Investor and the Company in substantially the form of Exhibit D to
this Agreement.
 
1.3.24. “Registration Statement” means the registration statement under the 1933
Act to be filed with the Securities and Exchange Commission for the registration
of the Shares pursuant to the Registration Rights Agreement.
 
1.3.25. “Restated Certificate” means the restated certificate of incorporation
in substantially the form of Exhibit E to this Agreement, which shall effect the
Reverse Split and the Change of Name upon filing with the Secretary of State of
the State of Delaware.
 
1.3.26. “Restricted Stockholders” shall have the meaning set forth in Section
6.16 of this Agreement.
 
1.3.27. “Reverse Split” means a one-for-ten reverse split of the Common Stock.
 
1.3.28. “RTI Agreement” means the stock purchase agreement dated September ,
2006, by and between the Company and stockholders of RTI with respect to the
Company’s acquisition of all of the capital stock of RTI, such agreement to be
in substantially the form provided to the Investor.
 
1.3.29. “Securities” means the Note, the shares of Series A Preferred Stock, the
Warrants and the Shares.
 
1.3.30. “SEC” means the Securities and Exchange Commission.
 
1.3.31. “SEC Documents” means, at any given time, the Company’s latest Form 10-K
or Form 10-KSB and all Forms 10-Q or 10-QSB and 8-K and all proxy statements or
information statements filed between the date the Form 10-K or Form 10-KSB was
filed and the date as to which a determination is being made until such time as
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
 
1.3.32. “Series A Preferred Stock” means the shares of Series A Preferred Stock
having the rights, preferences and privileges and subject to the limitations set
forth in the Certificate of Designation.
 
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1.3.33. “Series B Preferred Stock” means the shares of Series B Preferred Stock
to be issued pursuant to the RTI Agreement and having the rights, preferences
and privileges and subject to the limitations set forth in the Series B
Certificate of Designation.
 
1.3.34. “Series B Certificate of Designation” means the certificate of
designation relating to the Series B Preferred Stock, in substantially the form
of Exhibit F to this Agreement.
 
1.3.35. “Shares” means, collectively, the shares of Common Stock issued or
issuable (i) upon conversion of the Note or the Series A Preferred Stock or (ii)
upon exercise of the Warrants.
 
1.3.36. “Subsequent Financing” means any offer and sale of shares of the
Preferred Stock or debt that, in either case, is initially convertible into
shares of Common Stock or otherwise senior or superior to the Series A Preferred
Stock.
 
1.3.37. “Total Shares” means the total number of shares of Common Stock as are
issuable upon conversion of the Note, such number to be determined as if the
Note are never converted into shares of Series A Preferred Stock.
 
1.3.38. “Transaction Documents” means this Agreement, all Schedules and Exhibits
attached hereto, the Certificate of Designation, the Warrants, the Registration
Rights Agreement and all other documents and instruments to be executed and
delivered by the parties in order to consummate the transactions contemplated
hereby.
 
1.3.39. “Warrants” means the Common Stock Purchase Warrants in substantially the
form of Exhibits G-1 and G-2 to this Agreement.
 
1.4.
References to Agreement. All references in this Agreement to “herein” or words
of like effect, when referring to preamble, recitals, article and section
numbers, schedules and exhibits shall refer to this Agreement unless otherwise
stated.

 
ARTICLE II
 
SALE AND PURCHASE OF NOTE AND WARRANTS; PURCHASE PRICE

2.1.
Sale of Note and Issuance of Warrants. 

 
2.1.1. Upon the terms and subject to the conditions set forth herein, and in
accordance with applicable law, the Company agrees to sell to the Investor, and
the Investor agrees to purchase from the Company, on the Closing Date the Note
and the Warrants as set forth after the Investor’s name on Schedule A to this
Agreement for the Purchase Price. The Purchase Price shall be paid by the
Investor to the Company on the Closing Date by a wire transfer of the Purchase
Price into escrow to be held by the escrow agent pursuant to the terms of the
Escrow Agreement. The Company shall cause the Note and the Warrants to be issued
to the Investor upon the release of the Purchase Price to the Company by the
escrow agent pursuant to the terms of the Escrow Agreement.
 
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2.1.2. As set forth more fully in the Note, principal and interest on the Note
shall be automatically converted into such number of shares of Series A
Preferred Stock as is determined by dividing the principal amount of the Note by
the Preferred Stock Conversion Price, as set forth in the Note, which shall
initially be fifty seven and one-half cents ($.575) upon the filing by the
Company of the Restated Certificate. As set forth more fully in the Certificate
of Designation, each share of Series A Preferred Stock will be convertible into
twenty-five (25) shares of Common Stock.
 
2.1.3. Notwithstanding any other provision of this Agreement, except as
expressly provided in the Note, the Certificate of Designation or the Warrants,
no Investor shall be entitled to convert the Note or the Series A Preferred
Stock into shares of Common Stock or to exercise the Warrants to the extent that
such conversion or exercise would result in beneficial ownership by the Investor
and its Affiliates of more than 4.9% of the then outstanding number of shares of
Common Stock on such date. For the purposes of this Agreement 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. The
limitation set forth in this Section 2.1.3 is referred to as the “4.9%
Limitation.”
 
2.2.
Purchase Price. The Purchase Price payable by the Investor shall be delivered by
the Investor in the form of wire transfers in United States dollars from the
Investor to the escrow agent pursuant to the Escrow Agreement on the Closing
Date.

 
ARTICLE III
 
CLOSING DATE AND DELIVERIES AT CLOSING

3.1.
Closing Date. The Closing of the transactions contemplated by this Agreement
shall be held at the offices of counsel for the Company, at 1:00 P.M. local
time, on the Closing Date or on such other date and time and at such other place
as may be mutually agreed by the parties, including Closing by facsimile with
originals to follow.

 
3.2.
Deliveries by the Company. In addition to and without limiting any other
provision of this Agreement, the Company agrees to deliver, or cause to be
delivered, to the escrow agent under the Escrow Agreement, the following:

 
(a) At or prior to Closing, an executed Agreement with all exhibits and
schedules attached hereto.
 
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(b) At the Closing, the executed Note in the name of the Investor.
 
(c) At or prior to the Closing, executed Warrants in the name of the Investor.
 
(d) The executed Registration Rights Agreement.
 
(e) Certifications in form and substance acceptable to the Company and the
Investor from any and all brokers or agents involved in the transactions
contemplated hereby as to the amount of commission or compensation payable to
such broker or agent as a result of the consummation of the transactions
contemplated hereby and from the Company or Investor, as appropriate, to the
effect that reasonable reserves for any other commissions or compensation that
may be claimed by any broker or agent have been set aside.
 
(f) Evidence of approval of the board of directors of the Company of (i) the
Transaction Documents and the transactions contemplated hereby and (ii) the
Restated Certificate, which shall reflect the Change of Name and the Reverse
Split, which shall be subject to stockholder approval.
 
(g) Evidence that the Company has complied with the provisions of Sections 6.10
and 6.11 of this Agreement on or prior to the Closing Date.
 
(h) Evidence that the Company has filed the Certificate of Designation and the
Series B Certificate of Designation with the Secretary of State of Delaware.
 
(i) Good standing certificates of the Company issued by the Secretary of State
of Delaware.
 
(j) An opinion from the Company’s special counsel concerning the Transaction
Documents and the transactions contemplated hereby in form and substance
reasonably acceptable to Investor.
 
(k) The executed Escrow Agreement.
 
(l) Copies of all executive employment agreements, including executed amendments
to the employment agreements between the Company and Paul Burgess and the
Company and Joe Noto both dated August 28, 2006, all past and present financing
documentation or other documentation where stock could potentially be issued or
issued as payment, all past and present litigation documents and historical
financials, not previously provided to Investor.
 
(m) Evidence that the Company has complied with all of its obligations set forth
in Article IX of this Agreement.
 
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(n) Evidence that (i) that the Company shall have settled its obligations (i) to
Laurus Master Fund, Ltd. (“Laurus”) by the payment of $500,000, the issuance of
a promissory note in the principal amount of $250,000 and the issuance of a
warrant to purchase 14,583,333 shares of Common Stock at $.01 per share, and
(ii) to The Keshet Fund L.P. and Keshet L.P. (collectively, “Keshet”) by the
issuance of 3,000,000 shares of Common Stock in settlement of all of the
Corporation’s obligations to Keshet
 
(o) Such other documents or certificates as shall be reasonably requested by
Barron on behalf of the Investor.
 
3.3.
Deliveries by Investor. In addition to and without limiting any other provision
of this Agreement, the Investor agrees to deliver, or cause to be delivered, to
the escrow agent under the Escrow Agreement, the following:

 
(a) A deposit in the amount of the Purchase Price;
 
(b) The executed Agreement with all Exhibits and Schedules attached hereto;
 
(c) The executed Registration Rights Agreement;
 
(d) The executed Escrow Agreement; and
 
(e) Such other documents or certificates as shall be reasonably requested by the
Company or its counsel.
 
In the event any document (other than the Note and Warrants) provided to the
other party in Sections 3.2 and 3.3 herein are provided by facsimile, the party
shall forward an original document to the other party within seven (7) business
days.
 
3.4.
Further Assurances. The Company and the Investor shall, upon request, on or
after the Closing Date, cooperate with each other (specifically, the Company
shall cooperate with the Investor, and the Investor shall cooperate with the
Company) by furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all such things
as may be reasonably required by the parties or their counsel to consummate or
otherwise implement the transactions contemplated by this Agreement.

 
3.5.
Waiver. The Investor may waive any of the requirements of Section 3.2 of this
Agreement or any of its rights under the Escrow Agreement, and the Company at
its discretion may waive any of its rights of Section 3.3 of this Agreement or
any of its rights under the Escrow Agreement.

 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
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The Company represents and warrants to the Investor as of the date hereof and as
of Closing (which warranties and representations shall survive the Closing
regardless of what examinations, inspections, audits and other investigations
the Investor has heretofore made or may hereinafter make with respect to such
warranties and representations) as follows:
 
4.1.
Organization and Qualification.

 
4.1.1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified to do business in
any other jurisdiction by virtue of the nature of the businesses conducted by it
or the ownership or leasing of its properties, except where the failure to be so
qualified will not, when taken together with all other such failures, have a
Material Adverse Effect on the business, operations, properties, assets,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.
 
4.1.2. RTI will, at the closing date, be wholly owned by the Company. No person
has any right, title or interest in any equity, debt or other securities of any
kind, including any options, warrants, rights or convertible securities, of any
subsidiary of the Company.
 
4.2.
Governing Documents. The complete and correct copies of the Company’s Governing
Documents, as in effect on the Closing Date, has been delivered to the Investor.

 
4.3.
Capitalization.

 
4.3.1. The authorized and outstanding capital stock of the Company is set forth
in the Company’s quarterly report on Form 10-Q for the quarter ended June 30,
2006 with the SEC and updated on all subsequent SEC Documents. All shares of
capital stock have been duly authorized and are validly issued, and are fully
paid and no assessable, and free of preemptive rights. As of Closing, the
outstanding Common Stock will be as set forth on Schedule 4.3.1 to this
Agreement. Said Schedule 4.3.1 shall also set forth all shares issuable pursuant
to any agreements, including employment agreements, outstanding options, plans
providing for the grant of options, stock grants or other equity-based
incentives, warrants, convertible securities, notes and other debt instruments.
All outstanding shares of capital stock have been duly authorized and are
validly issued, and are fully paid and non-assessable and free of preemptive
rights. All shares of capital stock described above to be issued have been duly
authorized and when issued, will be validly issued, fully paid and
non-assessable and free of preemptive rights.
 
4.3.2. All shares of capital stock described above to be issued have been duly
authorized and when issued, will be validly issued, fully paid and
non-assessable and free from preemptive rights.
 
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4.3.3. Except pursuant to this Agreement and as set forth in Schedule 4.3.1
hereto, and as set forth in the Company’s SEC Documents, filed with the SEC, as
of the date hereof and as of the Closing Date, there are no outstanding options,
warrants, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which the
Company is or may be bound, to issue additional shares of its capital stock or
options, warrants, scrip or rights to subscribe for, calls or commitment of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of any class of its capital stock. The Company
agrees to inform the Investor in writing of any additional warrants granted
prior to the Closing Date.
 
4.3.4. The Company on the Closing Date (i) will have full right, power, and
authority to sell, the Note and Warrants to the Investor, free and clear of all
liens, charges, claims, options, pledges, restrictions, and encumbrances
whatsoever; and (ii) upon conversion of the Note or Series A Preferred Stock
issuable upon conversion of the Note and upon exercise of the Warrants, the
Investor will acquire title to the Shares issuable upon such conversion or
exercise, free and clear of all liens, charges, claims, options, pledges,
restrictions, and encumbrances whatsoever, except as otherwise provided in this
Agreement and except for any of the foregoing which results from actions or
omissions on the part of the Investor; provided, however, that as of the date of
this Agreement and as of the Closing Date, the Company does not have sufficient
authorized Common Stock for issuance upon conversion of the Note or the Series A
Preferred Stock or upon exercise of the Warrants. Accordingly, the Company
agrees that, not later than thirty (30) days from the Closing Date, the Company
will file with the SEC a proxy statement pursuant to Regulation 14A of the SEC
pursuant to the 1934 Act seeking stockholder approval of the Restated
Certificate, and the Company will use all commercially reasonable efforts to
obtain stockholder approval as soon as practical after filing the proxy
statement.
 
4.4.
Authority.

 
4.4.1. The Company has, subject to the qualification set forth in Section 4.3.4
of this Agreement, all requisite corporate power and authority to execute and
deliver this Agreement, the Note and the Warrants, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceedings on the part
of the Company is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby except as disclosed in this Agreement;
provided, however, that stockholder approval is required for the Company to
adopt the Restated Certificate. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms
subject to said Section 4.3.4; provided, however, that no representation is made
with respect to the ability of either Investor to convert the Note or, following
the filing of the Restated Certificate and the Certificate of Designation, the
Series A Preferred Stock or exercise any Warrant if and to the extent that the
Conversion Price of the Note or the Series A Preferred Stock, as defined in the
Note or the Certificate of Designation, or the number of Shares issuable upon
exercise of the Warrants would result in the issuance of a number of shares of
Common Stock which is greater than the amount by which the authorized Common
Stock exceeds the sum of the outstanding Common Stock and the shares of Common
Stock reserved for issuance pursuant to outstanding agreements and outstanding
options, warrants, rights, convertible securities and other securities upon the
exercise or conversion of which or pursuant to the terms of which additional
shares of Common Stock may be issuable (the foregoing proviso being referred to
as the “Authorized Stock Proviso”).
 
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4.4.2. The Company’s board of directors has adopted the Restated Certificate and
the Certificate of Designation, subject to stockholder approval of the Restated
Certificate, as required by the Delaware Law.
 
4.4.3. The shares of Series A Preferred Stock issuable upon conversion of the
Note and the Shares issuable upon conversion of the Note and the Series A
Preferred Stock and upon exercise of the Warrants will be, when so issued after
filing of the Restated Certificate, duly and validly authorized and issued,
fully paid and non-assessable and not issued in violation of any preemptive
rights or rights of first refusal.
 
4.4.4. Upon the filing with the Secretary of State of the State of Delaware of
the Restated Certificate, the shares of Series A Preferred Stock issued upon
conversion of the Note will be duly and validly authorized and issued, fully
paid and non-assessable.
 
4.5.
No Conflict; Required Filings and Consents. The execution and delivery of this
Agreement by the Company does not, and the performance by the Company of its
obligations hereunder will not: (i) conflict with or violate the Company’s
Governing Documents; (ii) conflict with, breach or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment or
decree (collectively, “Laws”) in effect as of the date of this Agreement and
applicable to the Company; or (iii) result in any breach of, constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, give to any other entity any right of termination, amendment,
acceleration or cancellation of, require payment under, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by the Company or any of its properties or assets is bound
other than violations, conflicts, breaches, defaults, terminations,
accelerations, creations of liens, or incumbency that would not, in the
aggregate, have a Material Adverse Effect except to the extent that stockholder
approval may be required as a result of the Authorized Stock Proviso, in which
event, the Company will seek stockholder approval to an increase in the
authorized Common Stock sufficient to enable the Company to be in compliance
with this Section 4.5.

 
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4.6.
Report and Financial Statements.

 
4.6.1. The Company has delivered to the Investor its audited balance sheet as of
December 31, 2005 and the audited statements of operations, stockholders equity
and cash flows for the years ended December 31, 2005 and 2004, and the unaudited
balance sheet as of June 30, 2006 and unaudited statements of operations and
cash flows for the six months ended June 30, 2006 and 2005 and stockholders’
equity for the six months ended June 30, 2006, in each case including notes to
the financial statements (collectively, the “Financial Statements”). Each of the
balance sheets contained in such Financial Statements (including the related
notes and schedules thereto) fairly presented the financial position of the
Company, as of its date, and each of the statements of operations, stockholders’
equity and cash flows in such Financial Statements (including any related notes
and schedules thereto) fairly presents, the results of operations, changes in
stockholders’ equity and changes in cash flows, as the case may be, of the
Company, for the periods to which they relate, in each case in accordance with
GAAP, except in each case as may be noted therein, subject to normal year-end
audit adjustments in the case of unaudited statements. The books and records of
the Company have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements
and reflect only actual transactions.  Peter C. Cosmas Co. CPA’s, who audited
the 2005 audited financial statements, is independent within the meaning of the
regulations of the SEC.
 
4.6.2. Peter C. Cosmas Co. CPA’s has not issued any management letter in
connection with its audit of the Company’s audited Financial Statements for 2005
or 2004.
 
4.7.
Compliance with Applicable Laws. The Company is not in violation of, or, to the
knowledge of the Company, is under investigation with respect to or has been
given notice or has been charged with the violation of any Laws, except for
violations which individually or in the aggregate do not have a Material Adverse
Effect.

 
4.8.
Brokers. No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company, except as set forth in Schedule 4.8 to this Agreement.

 
4.9.
SEC Documents. The Company is a publicly held company and it has made available
to the Investor true and complete copies of any requested SEC Documents. The
Company has registered its Common Stock pursuant to Section 12(g) of the 1934
Act. The Common Stock is quoted and traded on the OTC Bulletin Board. The
Company has received no notice, either oral or written, with respect to the
continued quotation or trading of the Common Stock on the OTC Bulletin Board.
The Company has not provided to the Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act, and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

 
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4.10.
Litigation. To the knowledge of the Company, no litigation, claim, or other
proceeding before any court or governmental agency is pending or to the
knowledge of the Company, threatened against the Company, the prosecution or
outcome of which, if adversely determined, is likely to have a Material Adverse
Effect.

 
4.11.
Exemption from Registration. Subject to the accuracy of the Investor’s
representations in Article V, except as required pursuant to the Registration
Rights Agreement, the sale of the Securities by the Company to the Investor will
not require registration under the 1933 Act. When validly converted in
accordance with the terms of the Note and the Series A Preferred Stock, and upon
exercise of the Warrants in accordance with their terms, the Shares underlying
the Series A Preferred Stock and the Warrants will be duly and validly issued,
fully paid, and non-assessable, subject to the qualification set forth in
Section 4.3.4 of this Agreement. The Company is issuing the Note, and, upon
conversion of the Note, the Series A Preferred Stock, and the Warrants in
accordance with and in reliance upon the exemption from securities registration
afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC
under the 1933 Act, and/or Section 4(2) of the 1933 Act; provided, however, that
certain filings and registrations may be required under state securities “blue
sky” laws depending upon the residency of the Investor.

 
4.12.
No General Solicitation or Advertising in Regard to this Transaction. Neither
the Company nor any of its Affiliates nor, to the knowledge of the Company, any
Person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D as
promulgated by the SEC under the 1933 Act) or general advertising with respect
to the sale of the Series A Preferred Stock or Warrants, or (ii) made any offers
or sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Series A Preferred Stock or
Warrants, under the 1933 Act, except as required herein.

 
4.13.
No Material Adverse Effect. Since March 31, 2006, no event or circumstance
resulting in a Material Adverse Effect has occurred or exists with respect to
the Company. No material supplier or customer has given notice, oral or written,
that it intends to cease or reduce the volume of its business with the Company
from historical levels. Since March 31, 2006, no event or circumstance has
occurred or exists with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under any applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed
in writing to the Investor.

 
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4.14.
Material Non-Public Information. The Company has not disclosed to either
Investor any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed; provided, however, that the Company has disclosed to the
Investor matters relating to the Company’s acquisition of RTI and the terms of
such acquisition.

 
4.15.
Internal Controls And Procedures. To the knowledge of the Company, the Company
maintains books and records and internal accounting controls which provide
reasonable assurance that (i) all transactions to which the Company or any
subsidiary is a party or by which its properties are bound have been executed
with management’s authorization; (ii) the recorded accounting of the Company’s
and its subsidiaries’ assets is compared with existing assets at regular
intervals; (iii) access to the Company’s and its subsidiaries’ assets is
permitted only in accordance with management’s authorization; and (iv) all
transactions to which the Company or any subsidiary is a party or by which its
properties are bound are recorded as necessary to permit preparation of the
consolidated financial statements of the Company in accordance with United
States generally accepted accounting principals; it being understood that the
Company has not conducted an internal controls audit and that no such audit has
been required under applicable law.

 
4.16.
Full Disclosure. No representation or warranty made by the Company in this
Agreement and no certificate or document furnished or to be furnished to the
Investor pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, taken as a whole,
not misleading.

 
ARTICLE V
 
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
 
The Investor represents and warrants to the Company that:

5.1.
Organization and Standing of the Investor. The Investor is a limited partnership
duly formed, validly existing and in good standing under the laws of the State
of Delaware. The Investor was not formed for the purpose of investing solely in
the Securities. The execution, delivery and performance of this Agreement by the
Investor and the consummation by the Investor of the transactions contemplated
hereby have been duly authorized by all necessary partnership action where
appropriate. The state in which any offer to purchase the Securities was made or
accepted by the Investor is the state shown as the Investor’s address.

 
5.2.
Authorization and Power. The Investor has the requisite power and authority to
enter into and perform this Agreement and to purchase the Securities being sold
to it hereunder. This Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Investor and at the Closing shall constitute
valid and binding obligations of the Investor enforceable against the Investor
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other
equitable principles of general application.

 
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5.3.
No Conflicts. The execution, delivery and performance of this Agreement and the
consummation by the Investor of the transactions contemplated hereby or relating
hereto do not and will not (i) result in a violation of the Investor’s charter
documents or bylaws where appropriate or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Investor is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Investor or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on the Investor). The Investor is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of the Investor’s obligations under this Agreement or to purchase the
securities from the Company in accordance with the terms hereof, provided that
for purposes of the representation made in this sentence, the Investor is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.

 
5.4.
Financial Risks. The Investor acknowledges that the Investor is able to bear the
financial risks associated with an investment in the securities being purchased
by the Investor from the Company and that it has been given full access to such
records of the Company and the subsidiaries and to the officers of the Company
and the subsidiaries as it has deemed necessary or appropriate to conduct its
due diligence investigation. The Investor is capable of evaluating the risks and
merits of an investment in the securities being purchased by the Investor from
the Company by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.

 
5.5.
Accredited Investor. The Investor is (i) an “accredited investor” as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act by reason
of Rule 501(a)(3) and (6), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the securities being purchased by the Investor from the Company. The Investor
is acquiring the Securities for investment and not with a view to the sale or
distribution thereof and understands that such Securities are restricted
securities, as defined in the 1933 Act, and may not be sold or otherwise
distributed except pursuant to an effective registration statement or an
exemption from the registration requirements of the 1933 Act and that the
certificates for such securities shares and Warrants will bear an investment
legend.

 
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5.6.
Brokers. No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Investor, except as set forth on Schedule 4.8, it being understood that the
compensation payable to the brokers listed on such Schedule 4.8 are payable by
the Company.

 
5.7.
Knowledge of Company. The Investor and its advisors, if any, have been, upon
request, furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
securities being purchased by the Investor from the Company. The Investor and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received complete and satisfactory answers to any such
inquiries.

 
5.8.
Risk Factors. The Investor understands that the investment by the Investor in
the Securities being purchased by the Investor from the Company involves a high
degree of risk. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the securities being purchased by the Investor
from the Company. The Investor warrants that it is able to bear the complete
loss of its investment in the securities being purchased by it from the Company.
In acquiring the Securities, the Investor is not relying upon any projections of
the future financial condition, results of operations or cash flows relating to
the Company. The Investor acknowledges and agrees that (a) it has had the
opportunity to obtain, and it has reviewed and discussed with the Company, to
the extent that it deems necessary, information concerning the Company,
including risks relating to the Company and its financial statements, and that
(b) in entering into and performing this Agreement, the Investor has not relied
on any oral representations made by the Company or any of its agents,
representatives or advisors.

 
5.9.
Full Disclosure. No representation or warranty made by the Investor in this
Agreement and no certificate or document furnished or to be furnished to the
Company pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. Except as set
forth or referred to in this Agreement, (a) the Investor does not have any
agreement or understanding with any person relating to acquiring, holding,
voting or disposing of any equity securities of the Company, and (b) during the
past five years there has not occurred any event listed in Item 401(f) of
Regulation S-K or any investigation relating to any such event with respect to
the Investor or any of its managing partners.

 
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ARTICLE VI
 
COVENANTS OF THE COMPANY
 
6.1.
Registration Rights. The Company shall cause the Registration Rights Agreement
to remain in full force and effect and shall comply in all material respects
with the terms thereof.

 
6.2.
Reservation of Common Stock. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to issue the Shares underlying the Note or the Series A Preferred Stock,
as the case may be, and the Warrants; provided, however, that if, as a result of
the Authorized Stock Proviso, there are not sufficient shares reserved as
required in this Section 6.2, the Company shall, within thirty (30) days after
the Company becomes aware of such deficiency, prepare and file with the SEC a
proxy statement pursuant to which the Company will seek stockholder approval for
an increase in the authorized Common Stock sufficient to enable the Company to
be in compliance with this Section 6.2. The Investor agrees to vote in favor of
such proposal.

 
6.3.
Compliance with Laws. The Company hereby agrees to comply in all material
respects with the Company’s reporting, filing and other obligations under the
federal securities laws.

 
6.4.
1934 Act Registration and Compliance. The Company will use its best efforts to
comply in all respects with its reporting and filing obligations under the 1934
Act, and will not take any action or file any document (whether or not permitted
by the 1934 Act or the rules thereunder) to terminate or suspend any such
registration or to terminate or suspend its reporting and filing obligations
under the 1934 until the Investor has disposed of all of its Shares or to cause
the trading of the Common Stock on the OTC Bulletin Board to be suspended or
terminated other than as a result of a change in the standards or requirements
for such trading. In the event that the Common Stock is traded in a market which
does not require the Company to be current in its reporting requirement under
the 1934 Act, the Company shall, nonetheless, continue to file all reports
required to be filed by a reporting company. If for any reason, the Company’s
common stock is not a reporting company pursuant to the 1934 Act, the Company
shall pay the Investor, as liquidated damages, an amount at the rate of
twenty-four percent (24%) per annum, of the Purchase Price of the principal
amount of the Note or the shares of Series A Preferred Stock (or shares of
Common Stock issued upon conversion of the Series A Preferred Stock) that are
then owned by the Investor. Such payment shall be made in cash or in shares of
Series A Preferred Stock, as the Investor shall elect, with the payment of the
Series A Preferred Stock being based on the Purchase Price. The liquidated
damages shall be paid on a per diem basis, for each day during which the Company
fails to be in compliance with this Section 6.4.

 
6.5.
Corporate Existence; Conflicting Agreements. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company. The
Company shall not enter into any agreement, the terms of which agreement would
restrict or impair the right or ability of the Company to perform any of its
obligations under this Agreement or any of the other agreements attached as
exhibits hereto.

 
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6.6.
Series A Preferred Stock. Until the earliest of (a) three years from the Closing
or (b) such date as the Investor shall have converted the Note or the Series A
Preferred Stock into not less than 90% of the Total Shares sold the underlying
Shares or (c) such date as the Investor shall have transferred the Note or the
Series A Preferred Stock which are convertible into an aggregate of not less
than 90% of the Total Shares, the Company will not issue any preferred stock of
with the exception of Series A Preferred Stock issued to the Investor as
provided in this Agreement and the Registration Rights Agreement.

 
6.7.
Convertible Debt. On or prior to the Closing Date, the Company will cause to be
cancelled all convertible debt in the Company. Until the earliest of (a) three
years from the Closing or (b) such date as the Investor shall have converted the
Note or the Series A Preferred Stock into not less than 90% of the Total Shares
sold the underlying Shares or (c) such date as the Investor shall have
transferred the Note or the Series A Preferred Stock which are convertible into
an aggregate of not less than 90% of the Total Shares, the Company will not
issue any convertible debt.

 
6.8.
Debt Limitation. The Company agrees that, for two years after Closing, neither
it nor its consolidated subsidiaries, shall permit outstanding indebtedness,
based on the principal amount outstanding at the end of a calendar quarter, to
be more than two times the sum of the EBITDA from continuing operations over the
four quarters ending on such date. Indebtedness shall include any liabilities or
obligations which, under GAAP, are reflected as indebtedness on the Company’s
consolidated balance sheet.

 
6.9.
Reset Equity Deals. On or prior to the Closing Date, the Company will cause to
be cancelled any and all reset features related to any shares outstanding that
could result in additional shares being issued. For a period of three years from
the Closing the Company will not enter into any transactions that have any reset
features that could result in additional shares being issued. For purposes of
this Section 6.9, a reset provision for a convertible security or derivative
security shall mean a provision (a) whereby the issuance of securities at a
lower price or having a lower conversion or exercise price will result in the
conversion or exercise price of the security being reduced to the lower price or
lower conversion or exercise price or more shares being issued, as the case may
be, or (b) which provide that the conversion or exercise price is based on the
market price at the time of conversion or exercise or (c) any other device which
results in an adjustment to the exercise price or conversion price of the
securities other than stock dividends, stock splits, stock distributions,
combination of shares, reverse splits, and other recapitalizations, as long as
they effect all stockholders appropriately.

 
6.10.
Independent Directors.

 
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6.10.1. The Company shall have caused the appointment of the majority of the
board of directors to be independent directors, as defined by the rules of the
Nasdaq Stock Market, not later than forty five (45) days after the Closing Date.
 
6.10.2. If, at any time subsequent to the expiration of forty five (45) days
after the Closing Date until the earlier of (a) three years from the Closing or
(b) such date as the Investor shall have converted not less than 90% of the
Convertible Securities and sold the underlying Shares or (c) such date as the
Investor shall have transferred not less than 90% of the Convertible Securities
or (d) such date as the total number or principal amount of Convertible
Securities which the Investor shall have either transferred or converted and
sold the underlying Shares shall represent not less than 90% of Shares issuable
upon conversion of the Convertible Securities issued to the Investor, the board
of directors shall not be composed of a majority of independent directors:
 
6.10.2.1. for a reason other than for an Excused Reason, the Company shall have
sixty (60) days to take such steps as are necessary so that a majority of the
Company’s directors are independent directors, and
 
6.10.2.2. for an Excused Reason, the Company shall have seventy five (75) days
from the date that the Company becomes aware of the event (or the last event if
there are more than one such event) giving rise to the Excused Reason, to take
such steps as are necessary so that a majority of the Company’s directors are
independent directors.
 
6.10.3. The term “Excused Reason” shall mean the death or resignation of an
independent director or the occurrence of an event whereby an independent
director ceases to be independent.
 
6.10.4. If, during the period referred to in Section 6.10.2 of this Agreement,
the Company shall have failed to have a board of directors composed of a
majority of independent directors after the date by which such situation was to
have been cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this
Agreement, whichever shall apply, the Company shall pay to the Investor, as
liquidated damages and not as a penalty, an amount equal to twenty percent (20%)
per annum of the Purchase Price of the then outstanding shares of Series A
Preferred Stock or principal amount of the Note, as the case may be, payable
monthly in cash or Series A Preferred Stock at the option of the Investor, based
on the number of days that such condition exists beyond the applicable grace
period; provided, however, that if the Restated Certificate shall not have been
filed, the Company may issue a Note in lieu of shares of Series A Preferred
Stock pursuant to this Section 6.10 and Section 6.11 of this Agreement. The
parties agree that the only damages payable for a violation of such provisions
shall be such liquidated damages. Nothing shall preclude the Investor from
pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement. The parties hereto agree that the liquidated damages
provided for in this Section 6.10.4 constitute a reasonable estimate of the
damages that may be incurred by the Investor by reason of the failure of the
Company to have a majority of directors as independent directors.
 
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6.10.5. In no event shall the total payments made pursuant to this Section 6.10
and Section 6.11, whether in cash or Series A Preferred Stock exceed in the
aggregate twenty percent (20%) of the Purchase Price of the shares of Series A
Preferred Stock or principal amount of the Note, as the case may be, that are
outstanding as of the date on which a computation is being made.
 
6.11.
Independent Directors on Audit and Compensation Committees. No later than forty
five (45) days the Closing Date, the Company will have an audit committee
comprised solely of not less than three independent directors and a compensation
committee comprised of not less than three directors, a majority of whom are
independent directors. If at any time after the subsequent to the Closing Date,
independent directors do not comprise all of the members of the audit committee
and a majority of the members of the compensation committee within the grace
periods provided in Section 6.10, the Company shall pay to the Investor, as
liquidated damages and not as a penalty, an amount equal to twenty percent (20%)
per annum of the Purchase Price of the then outstanding Series A Preferred Stock
or principal amount of the Note, as the case may be, payable monthly in cash or
Series A Preferred Stock at the option of the Investor, such payment shall be
based on the number of days that such condition exists. The parties agree that
the only damages payable for a violation of the terms of this Agreement with
respect to which liquidated damages are expressly provided shall be such
liquidated damages. Nothing shall preclude the Investor from pursuing other
remedies or obtaining specific performance or other equitable relief with
respect to this Agreement. Notwithstanding the foregoing, no liquidated damages
shall be payable pursuant to this Section 6.11 during any period for which
liquidated damages are payable pursuant to Section 6.10.

 

6.12.
Use of Proceeds. The Company will use the net proceeds from the sale of the Note
and the Warrants (excluding amounts paid by the Company for legal and
administrative fees and other expenses of the transaction) for working capital
and the acquisition of RTI (of which $1,500,000 shall be held in escrow as
provided in the RTI Agreement) and the payment of $500,000 to Laurus.

 

6.13.
Right of First Refusal

 
6.13.1. In the event that the Company seeks to raise additional funds through a
private placement of its securities (a “Proposed Financing”), other than Exempt
Issuances, the Investor shall have the right to participate in any subsequent
funding by the Company of the offering price on a pro rata basis, based on the
percentage that (a) the number of the Investor’s Total Shares, without regard to
the 4.9% Limitation, bears to (b) the total number of shares of Common Stock
outstanding plus the number of Shares issuable upon conversion of the Note or
Series A Preferred Stock, as the case may be, and any other series of
convertible preferred stock or debt securities, without regard to the 4.9%
Limitations any other limitations on exercise such other convertible preferred
stock or debt securities. This Section 6.14 shall apply to each such offering
based on the total purchase price of the securities being offered by the
Company.
 
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6.13.2. The terms on which the Investor shall purchase securities pursuant to
Proposed Financing shall be the same as such securities are purchased by other
investors. The Company shall give the Investor the opportunity to participate in
the offering by giving the Investor not less than ten (10) days notice setting
forth the terms of the Proposed Financing. In the event that the terms of the
Proposed Financing are changed in a manner which is more favorable to the
potential investor, the Company shall provide the Investor, at the same time as
the notice is provided to the other potential investors, with a new ten (10) day
notice setting forth the revised terms that are provided to the other potential
investors.
 
6.13.3. In the event that the Investor does not exercise its right to
participate in the Proposed Financing within the time limits set forth in
Section 6.14.2 of this Agreement, the Company may sell the securities in the
Proposed Financing at a price and on terms which are no more favorable to the
investors than the terms provided to the Investor. If the Company subsequently
changes the price or terms so that the price is more favorable to the investors
or so the terms are more favorable to the investors, the Company shall provide
the Investor with the opportunity to purchase the securities on the revised
terms in the manner set forth in Section 6.14.2 of this Agreement.
 

6.14.
Price Adjustment. From the date hereof until such time as the Investor holds no
Securities, except for Exempt Issuances, as to which this Section 6.14 does not
apply, if the Company closes on the sale or issuance of Common Stock at a price,
or warrants, options, convertible debt or equity securities with a exercise
price per share or exercise price per share which is less than the Conversion
Price then in effect (such lower sales price, conversion or exercise price, as
the case may be, being referred to as the “Lower Price”), the Conversion Price
in effect from and after the date of such transaction shall be reduced to the
Lower Price. For purpose of determining the exercise price of warrants issued by
the Company, the price, if any, paid per share for the warrants shall be added
to the exercise price of the warrants. A similar provision shall be included in
the Warrants.

 

6.15.
Price Adjustments Based on EBITDA Per Share.

 
6.15.1. The Certificate of Designation shall contain the following provisions,
and similar provisions shall be included in the Warrants.
 
6.15.2. In the event the Company’s consolidated EBITDA for the year ended
December 31, 2006 is less than $.0019 per share on a fully-diluted basis, then
the Conversion Price shall be reduced by the percentage shortfall, up to a
maximum of 30%. Thus, if EBITDA per share for the year ended December 31, 2006
is $.00133 per share on a fully-diluted basis, the Conversion Price shall be
reduced by 30%. Such reduction shall be made at the time the Company files its
Form 10-KSB for the year ended December 31, 2006, and shall apply to the Note or
all shares of the Series A Preferred Stock, as the case may be, which are
outstanding on the date the Form 10-KSB is filed, or, if not filed on time, on
the date that filing was required. For purpose of this Section 6.15, EBITDA
shall be based on net income plus (a) any charges relating to the transaction
contemplated by this Agreement, the Note and the Registration Rights Agreement
plus (b) any non-recurring items other than those referred to in clause (c) of
this Section 6.15.2, minus (c) any Earn-Out Payment, as defined in the RTI
Agreement, or comparable payments to the former stockholders of RTI which, in
the aggregate, are in excess of $750,000.
 
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6.15.3. In the event the Company’s consolidated EBITDA for the year ended
December 31, 2007 is less than $.00549 per share on a fully-diluted basis, then
the Conversion Price shall be reduced by the percentage shortfall, up to a
maximum of 30%. Thus, if EBITDA for the year ended December 31, 2007 is $.003843
per share on a fully-diluted basis, the Conversion Price shall be reduced by
30%. Such reduction shall be made at the time the Company files its Form 10-KSB
for the year ended December 31, 2007, and shall apply to the Note or all shares
of the Series A Preferred Stock, as the case may be, which are outstanding on
the date the Form 10-KSB is filed, or, if not filed on time, on the date that
filing was required. 
 
6.15.4. For purpose of determining EBITDA Per Share on a fully-diluted basis,
all shares of Common Stock issuable upon conversion of convertible securities
and upon exercise of warrants and options shall be deemed to be outstanding,
regardless of whether (i) such shares are treated as outstanding for determining
diluted earnings per share under GAAP, (ii) such securities are “in the money,”
or (iii) such shares may be issued as a result of the 4.9% Limitation. The per
share amounts set forth in Sections 6.15.2 and 6.15.3 of this Agreement shall be
adjusted in accordance with GAAP to reflect any stock dividend, split,
distribution, reverse split or combination of shares or other recapitalization.
 

6.16.
Insider Selling. The earliest any Restricted Stockholders can start selling
their shares of Common Stock in the public market shall be twenty four (24)
months from the Closing Date. Restricted Stockholders shall include all persons
who are officers and directors of the Company and all persons who are, as of the
date hereof, officers or directors of RTI and their spouses. Andrew Barron
Worden and the Investor shall not be considered Restricted Stockholders. The
restrictions in this Section 6.16 shall not apply to shares issued pursuant to a
stock option or long-term incentive plans which may be approved by the
Compensation Committee provided that such committee is comprises of a majority
of independent directors. The Company may include in such registration statement
shares of Common Stock held by former stockholders of RTI who were not officers
or directors of RTI during the three months prior to the Closing Date; provided,
however, that, if, in order for the registration statement to be declared
effective by the SEC, it is necessary to reduce the number of shares covered by
the registration statement, all of the shares being sold by such former RTI
stockholders shall be excluded prior to any reduction in the shares being sold
by the Investor.

 

6.17.
Employment and Consulting Contracts. For three years after the Closing, Company
must have a unanimous approval from the Compensation Committee of the Board of
Directors having reached a conclusion that any awards other than salary are
usual, appropriate and reasonable for any officer, director or consultants whose
compensation is more than $100,000 per annum. This Section 6.17 does not apply
to attorneys, accountants and other persons who provide professional services to
the Company.

 
SECURITIES PURCHASE AGREEMENT

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6.18.
Subsequent Equity Sales. From the date hereof until such time as the Investor
hold no more than 5% of the Shares (determined as if the Note and Series A
Preferred Stock were fully converted and the Warrants fully exercised), the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a “Variable Rate Transaction” or an
“MFN Transaction” (each as defined below). The term “Variable Rate Transaction”
shall mean a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock. The
term “MFN Transaction” shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms which are more favorable
to the Investor than the terms initially provided to the investor in its initial
securities purchase agreement with the Company. The Investor shall be entitled
to obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
Notwithstanding the foregoing, this Section 6.18 shall not apply in respect of
an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction
shall be an Exempt Issuance.

 

6.19.
Approval of Restated Certificate. The Company shall obtain stockholder approval
of the Restated Certificate and the file the Restated Certificate not later than
one hundred twenty (120) from the Closing Date. In the event that the Restated
Certificate is not filed with the Secretary of State of the State of Delaware
within one hundred fifty days (150) from the Closing Date, then for each whole
or partial month that elapses between the 150th day from the Closing Date and
the date of such filing, the Conversion Price, then in effect of the Note and
the Series A Preferred Stock (as defined in the Note and the Certificate of
Designations) and the Exercise Price of the Warrants (as defined the Warrants)
shall automatically be reduced by 6%.

 

6.20.
Stock Splits. All forward and reverse stock splits shall affect all equity and
derivative holders proportionately.

 

6.21.
No Disclosure of Material Non-Public Information. The Company will not disclose
to the Investor any material non-public information concerning the Company
except (a) with the consent of Investor and (b) if such consent is given,
pursuant to a non-disclosure agreement which provides, among other things, that
the Investor will not disclose the material non-public information to any person
and the Investor will not engage in any transactions involving the Company’s
securities while in possession of material non-public information. 

 
SECURITIES PURCHASE AGREEMENT

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6.22.
Payment of Due Diligence Expenses. At Closing the Escrow Agent shall disperse to
the Barron Fifty Thousand Dollars ($50,000.00) for due diligence, legal and any
other expenses which the Investor may incur in connection with this Agreement.

 
ARTICLE VII
 
COVENANTS OF THE INVESTORS

7.1.
Compliance with Law. The Investor covenants that its trading activities with
respect to shares of the Company’s Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of any public market on which the Company’s Common Stock is
listed.

 
7.2.
Transfer Restrictions. The Investor acknowledges that (a) the Note, and Warrants
and shares of Series A Preferred Stock and Common Stock issuable upon conversion
of the Note and Series A Preferred Stock or upon exercise of the Warrants have
not been registered under the 1933 Act, and may not be transferred unless (i)
they are subject to a current and effective registration statement under the
1933 Act, or (ii) the Investor shall have delivered to the Company an opinion of
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; and (b) any sale
of the Securities made in reliance on Rule 144 promulgated under the 1933 Act
may be made only in accordance with the terms of said Rule, to the extent that
such Rule is applicable.

 
7.3.
Restrictive Legend. The Investor acknowledges and agrees that the Securities and
the Shares shall bear a restrictive legend and a stop-transfer order may be
placed against transfer of any such Securities except that the requirement for a
restrictive legend shall not apply to Shares sold pursuant to a current and
effective registration statement or a sale pursuant Rule 144 or any successor
rule:

 
ARTICLE VIII
 
CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS

The obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:

8.1.
No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.

 
SECURITIES PURCHASE AGREEMENT

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8.2.
Representations True and Correct. The representations and warranties of the
Investor contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.

 
8.3.
Compliance with Covenants. The Investor shall have performed and complied in all
material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date.

 
8.4.
No Adverse Proceedings. On the Closing Date, no action or proceeding shall be
pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.

 
ARTICLE IX
 
CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS

The obligation of the Investor to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:

9.1.
No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.

 
9.2.
Representations True and Correct. The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.

 
9.3.
Compliance with Covenants. The Company shall have performed and complied in all
material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date.

 
9.4.
No Adverse Proceedings. On the Closing Date, no action or proceeding shall be
pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.

 
9.5.
Acquisition of RTI. The Company shall have acquired RTI pursuant to the RTI
Agreement, and prior to the closing, the Company shall have provided the
Investor with evidence that RTI’s EBITDA for the year ended March 31, 2006 was
not less than seven hundred ninety-nine thousand dollars ($799,000), after
deducting the earnout of five hundred sixty thousand dollars ($560,000).

 
SECURITIES PURCHASE AGREEMENT

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9.6.
Approval of Restated Certificate. The Company’s board of directors shall have
approved the Restated Certificate.

 
9.7.
Issuance of Warrants or Stock to Former Investors. The Company shall have issued
Laurus Warrant to purchase 14,583,333 shares of Common Stock, and shall have
issued Keshet 3,000,000 shares of Common Stock.

 
ARTICLE X
 
TERMINATION, AMENDMENT AND WAIVER

10.1.
Termination. This Agreement may be terminated at any time prior to the Closing
Date

 
10.1.1. by mutual written consent of the Investor and the Company;
 
10.1.2. by the Company upon a material breach of any representation, warranty,
covenant or agreement on the part of the Investor set forth in this Agreement,
or by the Investor upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
by either party if (a) the representations or warranties of the other party,
taken together, shall fail to be true and correct in all material respects or
(b) if the conditions to closing set forth in Article VIII or Article IX of this
Agreement not be satisfied, and such breach or failure shall, if capable of
cure, not have been cured within five (5) business days after receipt by the
party in breach of a notice from the non-breaching party setting forth in detail
the nature of such breach.
 
10.2.
Effect of Termination. Except as otherwise provided herein, in the event of the
termination of this Agreement pursuant to Section 10.1 hereof, there shall be no
liability on the part of the Company or the Investor or any of its officers,
directors, agents or other representatives and all rights and obligations of any
party hereto shall cease; provided, that if this Agreement shall be terminated
pursuant to Section 10.1.2 of this Agreement, the breaching party shall be
liable to the non-breaching party for all of the costs and expenses of the
non-breaching party not to exceed $50,000. The breaching party shall be the
party who shall have breached the representations, warranties, covenants and
agreements under this Agreement or who shall have failed to satisfy the closing
conditions.

 
10.3.
Amendment. This Agreement may be amended by the parties hereto any time prior to
the Closing Date by an instrument in writing signed by the parties hereto;
provided, however that the 4.9% Limitation may not be amended or waived.

 
10.4.
Waiver. At any time prior to the Closing Date, the Company or the Investor, as
appropriate, may: (a) extend the time for the performance of any of the
obligations or other acts of other party or; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance with
any of the agreements or conditions contained herein for its or their benefit
other than the 4.9% Limitation which may not be waived. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound hereby.

 
SECURITIES PURCHASE AGREEMENT

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ARTICLE XI
 
GENERAL PROVISIONS

11.1.
Transaction Costs. Except as otherwise provided herein, each of the parties
shall pay all of his or its costs and expenses (including attorney fees and
other legal costs and expenses and accountants’ fees and other accounting costs
and expenses) incurred by that party in connection with this Agreement;
provided, the Company shall pay the Investor for its expenses as provided in
Section 6.22.

 
11.2.
Indemnification. The Investor agrees to indemnify, defend and hold the Company
(following the Closing Date) and its officers and directors harmless against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities or damages, including interest, penalties and reasonable attorney’s
fees, that it shall incur or suffer, which arise out of or result from any
breach of this Agreement by the Investor or failure by the Investor to perform
with respect to the representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished
under this Agreement. The Company agrees to indemnify, defend and hold the
Investor (following the Closing Date) harmless against and in respect of any and
all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney’s fees, that it
shall incur or suffer, which arise out of, result from or relate to any breach
of this Agreement or failure by the Company to perform with respect to the
representations, warranties or covenants contained in this Agreement or in any
exhibit or other instrument furnished or to be furnished under this Agreement.
In no event shall the Company or the Investor be entitled to recover
consequential or punitive damages resulting from a breach or violation of this
Agreement nor shall any party have any liability hereunder in the event of gross
negligence or willful misconduct of the indemnified party. In the event of the
failure of the Company to issue the Series A Preferred Stock and Warrants in
violation of the provisions of this Agreement, the Investor, as their sole
remedy, shall be entitled to pursue a remedy of specific performance upon tender
into the Court an amount equal to the Purchase Price hereunder. The
indemnification by the Investor shall be limited to $50,000.00. This Section
11.2 shall not relate to indemnification under the Registration Rights
Agreement.

 
11.3.
Headings. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 
11.4.
Entire Agreement. This Agreement (together with the Schedule, Exhibits, Warrants
and documents referred to herein) constitute the entire agreement of the parties
and supersede all prior agreements and undertakings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.

 
SECURITIES PURCHASE AGREEMENT

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11.5.
Notices. All notices and other communications hereunder shall be in writing and
shall be deemed to have been given (i) on the date they are delivered if
delivered in person; (ii) on the date initially received if delivered by
facsimile transmission or e-mail provided that any notice by facsimile or e-mail
shall only be effective if receipt is acknowledged by the recipient; or (iv) on
the on the date of delivery as shown on the return receipt, if mailed by
registered or certified mail, return receipt requested with postage and other
fees prepaid as follows:

 
If to the Company:

Science Dynamics Corporation
7150 North Park Drive; Suite 500
Pennsauken, NJ 08109
Attn: Mr. Paul Burgess, CEO
Facsimile:
e-mail: pburgess@sysmanagement.com

With a copy to:
 
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Attention: Asher S. Levitsky P.C.
Facsimile No.: (212) 930-9725
e-mail: alevitsky@srff.com

If to the Investor:

at its address set forth in Schedule A

11.6.
Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.

 
SECURITIES PURCHASE AGREEMENT

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11.7.
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.

 
11.8.
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. In resolving any dispute regarding, or construing any provision in,
this Agreement, there shall be no presumption made or inference drawn because of
the drafting history of the Agreement, or because of the inclusion of a
provision not contained in a prior draft or the deletion or modification of a
provision contained in a prior draft.

 
11.9.
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.

 
11.10.
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 federal and state courts situated in 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 issues in dispute.

 
11.11.
Preparation and Filing of SEC filings. The Investor shall reasonably assist and
cooperate with the Company in the preparation of all filings with the SEC after
the Closing Date due after the Closing Date.

 
11.12.
Further Assurances, Cooperation. Each party shall, upon reasonable request by
the other party, execute and deliver any additional documents necessary or
desirable to complete the transactions herein pursuant to and in the manner
contemplated by this Agreement. The parties hereto agree to cooperate and use
their respective best efforts to consummate the transactions contemplated by
this Agreement.

 
11.13.
Survival. The representations, warranties, covenants and agreements made herein
shall survive the Closing of the transaction contemplated hereby.

 
11.14.
Third Parties. Except as disclosed in this Agreement, nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties hereto and
their respective administrators, executors, legal representatives, heirs,
successors and assignees. Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.

 
SECURITIES PURCHASE AGREEMENT

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11.15.
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 any 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.

 
11.16.
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 the party who delivered the
Agreement by facsimile transmission.

 
[SIGNATURES ON FOLLOWING PAGE]
 
SECURITIES PURCHASE AGREEMENT

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IN WITNESS WHEREOF, the Investor and the Company have as of the date first
written above executed this Agreement.

       
THE COMPANY:
 
SCIENCE DYNAMICS CORPORATION
     
   
   
   By:  /s/ Joseph Noto       

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Joseph Noto, CFO      

       
INVESTORS:

BARRON PARTNERS LP
By: Barron Capital Advisors, LLC, its General Partner
     
   
   
 
 By: 
/s/ Andrew Barron Worden       

--------------------------------------------------------------------------------

Andrew Barron Worden
Managing Partner
730 Fifth Avenue, 25th Floor
New York NY 10019
     

 

--------------------------------------------------------------------------------

 
Schedule A

 
 
 
NAME AND ADDRESS
 
AMOUNT OF INVESTMENT
 
NUMBER OF SHARES
OF PREFERRED STOCK
INTO WHICH NOTE IS CONVERTIBLE
 
NUMBER OF SHARES
OF COMMON STOCK
INTO WHICH PREFERRED
STOCK IS CONVERTIBLE
 
 
NUMBER OF SHARES UNDERLYING “A” AND “B” WARRANTS
 
Barron Partners LP
730 Fifth Avenue
25th Floor
New York, New York 10019
Attn: Andrew Barron Worden
e-mail: abw@barronpartners.com
hrm@barronpartners.com
 
$
4,500,000
   
7,826,087
   
19,565,218
   
125,000,000/
125,000,000
 

 
* Reflects one-for-ten reverse split.
 

--------------------------------------------------------------------------------

Schedule 4.3.1 – Capitalization
 
Schedule 4.3.1
             
Science Dynamics Corporation, Inc
             
Cap Table Post RTI Closing ( Aug 31, 2006 Assumed)
                             
 
   
Common SHS 
                       
Share o/s as of Aug 25, 2006
   
113,980,767
       
Shares to be issued at closing:
             
Keshet
   
3,000,000
                       
Mike Ricciardi (RTI Sale)
   
50,000,000
                         
Shares o/s post closing
   
166,980,767
                       
Derivatives at Closing:
                             
Feb 28, 2005 Options SMEI EE's
   
1,735,000
       
April 1, 2005 Options CFO
   
2,000,000
       
Feb 28, 2005 Options SDC EE's
   
505,000
       
RTI Options
   
4,250,000
                       
Laurus Warrants (2.0M Note)
   
6,000,000
       
Seller 5.0mshs Preferred Conversion
   
8,333,333
       
Laurus Warrants Nov18 Modification
   
3,000,000
       
Laurus Warrants
   
14,583,333
   
Replaces Laurus Debt
 
Friends and Family Warrrants $0.12
   
11,667,000
       
A Bashflorth options
   
8,000,000
       
P Burgess (CEO) Options
   
10,000,000
                       
Total derivatives
   
70,073,666
                       
Fully Diluted SH count post Closing
   
237,054,433
                                       
Barron:
             
Barron Warrants
   
250,000,000
       
Barron SHS
   
195,652,174
                       
Total with Barron
   
682,706,607
                       
Dragonfly warrants $.05
   
4,891,000
       
Dragonfly warrants $.125
   
4,891,000
                       
Total with Barron and Dragonfly
   
692,488,607
                       
Total After Reverse
   
69,248,861
       

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Schedule 4.8 – Broker
 
Schedule 4.8 to the Securities Purchase Agreement between Science Dynamics
Corporation and Barron Partners LP

Name of Broker  
 
Amount of fee or commission due
Dragonfly Capital Partners, LLC:
 
 
$234,000 of which $134,000 shall be paid   at the closing and the balance of
which shall be paid post-closing and warrants to purchase 4,891,000 shares of
the Company’s common stock at $0.05 per share and warrants to purchase 4,891,000
shares of the Company’s common stock at $0.125 per share
     
Colebrooke Capital:
 
$126,000 of which $76,000 shall be paid at closing and the
     
CRESCENT FUND LLC
 
$20,000 to be paid post-closing
     
Watergate Holding LLC     
 
$115,000

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Exhibit A

Form of Note

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Exhibit B

Form of Certificate of Designation

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Exhibit C

Escrow Agreement

--------------------------------------------------------------------------------

Exhibit D

Registration Rights Agreement
 

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Exhibit E

Restated Certificate

--------------------------------------------------------------------------------

Exhibit F

Form of Series B Certificate of Designation

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Exhibit G-1

$.05 Warrants

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Exhibit F-2

$.125 Warrant

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