Document:

Unassociated Document

    
 

    WARRANT
      AGREEMENT

     

    Agreement
      made as of March __, 2006 between Global Technology Industries, Inc., a Delaware
      corporation, with offices at 375 Park Avenue, Suite 1505, New York, NY 10152
      (“Company”),
      and
Continental
      Stock Transfer & Trust Company,
      a New
      York corporation, with offices at 17 Battery Place, New York, New York 10004
      (“Warrant
      Agent”).

     

    WHEREAS,
      the Company is engaged in a public offering (“Public
      Offering”)
      of
      Units, (“Units”),
      consisting of one share of the Company’s common stock, par value $0.0001 per
      share (“Common
      Stock”)
      and,
      one warrant, each warrant to purchase one share of Common Stock, in connection
      therewith, has determined to issue and deliver (i) up to 11,500,000 Warrants
      (“Public
      Warrants”)
      to the
      public investors, each of such Public Warrants evidencing the right of the
      holder thereof to purchase one share of Common Stock for $6.00, subject to
      adjustment as described herein, (ii) 416,667 Warrants sold separately and
      250,000 Warrants underlying the 250,000 Units (the “Insider
      Warrants”)
      to GTI
      Holdings, LLC in the private placement which will occur immediately prior to
      the
      offering, each of such Insider Warrants evidencing the right of the holder
      thereof to purchase one share of Common Stock for a price of
      $6.00, and (iii) an option to purchase up to 500,000 Warrants to
      Morgan Joseph & Co. Inc. (“Morgan
      Joseph”)
      or its
      designees (“Representative’s
      Warrants”
and,
      together with the Public Warrants and the Insider Warrants, the
“Warrants”),
      each
      such Representative’s Warrant evidencing the right of the holder thereof to
      purchase one share of Common Stock for $7.50, subject to adjustment as described
      herein; and

     

      WHEREAS,
        the Company has filed with the Securities and Exchange Commission a Registration
        Statement, No. 333-132505 on Form S-1 (“Registration
        Statement”)
        for
        the registration, under the Securities Act of 1933, as amended (“Act”)
        of,
        among other securities, the Warrants and the Common Stock issuable upon exercise
        of the Warrants; and

     

    WHEREAS,
      the Company desires the Warrant Agent to act on behalf of the Company, and
      the
      Warrant Agent is willing to so act, in connection with the issuance,
      registration, transfer, exchange, redemption and exercise of the Warrants;
      and

     

    WHEREAS,
      the Company desires to provide for the form and provisions of the Warrants,
      the
      terms upon which they shall be issued and exercised, and the respective rights,
      limitation of rights, and immunities of the Company, the Warrant Agent, and
      the
      holders of the Warrants; and

     

    WHEREAS,
      all acts and things have been done and performed which are necessary to make
      the
      Warrants, when executed on behalf of the Company and countersigned by or on
      behalf of the Warrant Agent, as provided herein, the valid, binding and legal
      obligations of the Company, and to authorize the execution and delivery of
      this
      Agreement.

     

    NOW,
      THEREFORE, in consideration of the mutual agreements herein contained, the
      parties hereto agree as follows:

     

    1.   Appointment
      of Warrant Agent.
      The
      Company hereby appoints the Warrant Agent to act as agent for the Company for
      the Warrants, and the Warrant Agent hereby accepts such appointment and agrees
      to perform the same in accordance with the terms and conditions set forth in
      this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.   Warrants.

     

    2.1   Form
      of Warrant.
      Each
      Warrant shall be issued in registered form only, shall be in substantially
      the
      form of Exhibit A hereto, the provisions of which are incorporated herein and
      shall be signed by, or bear the facsimile signature of, the Chairman of the
      Board, Chief Executive Officer or President, and Chief Financial Officer,
      Secretary or Assistant Secretary of the Company and shall bear a facsimile
      of
      the Company’s seal. In the event the person whose facsimile signature has been
      placed upon any Warrant shall have ceased to serve in the capacity in which
      such
      person signed the Warrant before such Warrant is issued, it may be issued with
      the same effect as if he or she had not ceased to be such at the date of
      issuance. All of the Warrants shall initially be represented by one or more
      book-entry certificates (each a “Book
      Entry Warrant Certificate”).

     

    2.2   Effect
      of Countersignature.
      Unless
      and until countersigned by the Warrant Agent pursuant to this Agreement, a
      Warrant shall be invalid and of no effect and may not be exercised by the holder
      thereof.

     

    2.3   Registration.

     

    2.3.1   Warrant
      Register.
      The
      Warrant Agent shall maintain books (“Warrant
      Register”),
      for
      the registration of original issuance and the registration of transfer of the
      Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall
      issue and register the Warrants in the names of the respective holders thereof
      in such denominations and otherwise in accordance with instructions delivered
      to
      the Warrant Agent by the Company. All of the Warrants shall initially be
      represented by one or more Book-Entry Warrant Certificates deposited with The
      Depository Trust Company (the “Depository”)
      and
      registered in the name of Cede & Co., a nominee of the Depository. Ownership
      of beneficial interests in the Warrants shall be shown on, and the transfer
      of
      such ownership shall be effected through, records maintained by (i) the
      Depository or its nominee for each Book-Entry Warrant Certificate, or (ii)
      institutions that have accounts with the Depository (such institution, with
      respect to a Warrant in its account, a “Participant”).

     

    If
      the
      Depository subsequently ceases to make its book-entry settlement system
      available for the Warrants, the Company may instruct the Warrant Agent regarding
      making other arrangements for book-entry settlement. In the event that the
      Warrants are not eligible for, or it is no longer necessary to have the Warrants
      available in, book-entry form, the Warrant Agent shall provide written
      instructions to the Depository to deliver to the Warrant Agent for cancellation
      each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant
      Agent to deliver to the Depository definitive Warrant Certificates in physical
      form evidencing such Warrants. Such definitive Warrant Certificates shall be
      in
      the form annexed hereto as Exhibit A with appropriate insertions, modifications
      and omissions, as provided above.

     

    2.3.2   Registered
      Holder.
      Prior
      to due presentment for registration of transfer of any Warrant, the Company
      and
      the Warrant Agent may deem and treat the person in whose name such Warrant
      shall
      be registered upon the Warrant Register (“Registered
      Holder”),
      as
      the absolute owner of such Warrant and of each Warrant represented thereby
      (notwithstanding any notation of ownership or other writing on the Warrant
      Certificate made by anyone other than the Company or the Warrant Agent), for
      the
      purpose of any exercise thereof, and for all other purposes, and neither the
      Company nor the Warrant Agent shall be affected by any notice to the
      contrary.

     

    
      
        
        

      

      
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    2.4   Detachability
      of Warrants.
      The
      securities comprising the Units will not be separately transferable until 90
      days after the date hereof unless Morgan Joseph informs the Company of its
      decision to allow earlier separate trading, but in no event will Morgan Joseph
      allow separate trading of the securities comprising the Units until the Company
      files a Current Report on Form 8-K which includes an audited balance sheet
      reflecting the receipt by the Company of the gross proceeds of the Public
      Offering including the proceeds received by the Company from the exercise of
      the
      Underwriter’s over-allotment option, if the over-allotment option is exercised
      prior to the filing of the Form 8-K.

     

    2.5   Other
      Warrants.
      The
      Representative’s Warrants shall have the same terms and be in the same form as
      the Public Warrants except with respect to the Warrant Price as set forth below
      in Section 3.1. The Insider Warrants shall have the same terms and be in
      the same form as the Public Warrants, except that, in consideration of the
      restrictions on transfer of the Insider Warrants, they are exercisable on a
      cashless basis as provided in Section 3.3.1 hereof.

     

    3.   Terms
      and Exercise of Warrants

     

    3.1   Warrant
      Price.
      Each
      Public Warrant and Insider Warrant shall, when countersigned by the Warrant
      Agent, entitle the registered holder thereof, subject to the provisions of
      such
      Public Warrant or Insider Warrant and of this Warrant Agreement, to purchase
      from the Company the number of shares of Common Stock stated therein, at the
      price of $6.00 per whole share, subject to the adjustments provided in
      Section 4 hereof and in the last sentence of this Section 3.1. Each
      Representative’s Warrant shall, when countersigned by the Warrant Agent, entitle
      the registered holder thereof, subject to the provision of such Representative’s
      Warrant and of this Warrant Agreement, to purchase from the Company the number
      of shares of Common Stock stated therein, at the price of $7.50 per whole share,
      subject to the adjustments provided in Section 4 hereof. The term “Warrant
      Price”
as
      used
      in this Warrant Agreement refers to the price per share at which Common Stock
      may be purchased at the time a Warrant is exercised. The Company in its sole
      discretion may lower the Warrant Price at any time prior to the Expiration
      Date;
      provided, however, that the any change in the Warrant Price must apply equally
      to all of the Warrants.

     

      3.2   Duration
        of Warrants.
        A
        Warrant may be exercised only during the period (“Exercise
        Period”)
        commencing on the later of the consummation by the Company of a merger, capital
        stock exchange, asset acquisition or other similar business combination
        (“Business
        Combination”)
        (as
        described more fully in the Company’s Registration Statement) or __________,
        2007, and terminating at 5:00 p.m., New York City local time on the earlier
        to
        occur of (i) __________, 2010 or (ii) the date fixed for redemption of the
        Warrants as provided in Section 6 of this Agreement (“Expiration
        Date”).
        Except with respect to the right to receive the Redemption Price as set forth
        in
        Section 6 hereunder (subject to extension in the limited circumstances set
        forth
        in the Warrants), each Warrant not exercised on or before the Expiration
        Date
        shall become void, and all rights thereunder and all rights in respect thereof
        under this Agreement shall cease at the close of business on the Expiration
        Date. The Company in its sole discretion may extend the duration of the Warrants
        by delaying the Expiration Date; provided, however, that any extension of
        the
        duration of the Warrants must apply equally to all of the
        Warrants.

     

    
      
        
        

      

      
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    3.3   Exercise
      of Warrants.

     

    3.3.1   Payment.
      A
      Registered Holder may exercise a Warrant by delivering, not later than 5:00
      P.M., New York City local time, on any Business Day during the Exercise Period
      (the “Exercise Date”) to the Warrant Agent at its
      corporate trust department (i) the Warrant Certificate evidencing the Warrants
      to be exercised, or, in the case of a Book-Entry Warrant Certificate, the
      Warrants to be exercised (the “Book-Entry Warrants”)
      free on the records of the Depository to an account of the Warrant Agent at
      the
      Depository designated for such purpose in writing by the Warrant Agent to the
      Depository from time to time, (ii) an election to purchase the Shares underlying
      the Warrants to be exercised (“Election to Purchase”),
      properly completed and executed by the Registered Holder on the reverse of
      the
      Warrant Certificate or, in the case of a Book-Entry Warrant Certificate,
      properly delivered by the Participant in accordance with the Depository’s
      procedures, and (iii) the Warrant Price for each Warrant to be exercised in
      lawful money of the United States of America by certified or official bank
      check
      or by bank wire transfer in immediately available funds; provided, however,
      that
      with respect to the Insider Warrants, any holder of Insider Warrants may, in
      lieu of payment of the Warrant Price, surrender its Insider Warrants for that
      number of shares of Common Stock equal to the quotient obtained by dividing
      (x)
      the product of the number of shares of Common Stock underlying the surrendered
      Insider Warrants, multiplied by the difference between the Fair Market Value
      (defined below) and the Warrant Price by (y) the Fair Market Value; provided,
      further, that with respect to the Warrants, other than the Insider Warrants,
      the
      Company may require that in lieu of providing the Warrant Price, the holder
      of
      such Warrants will receive, upon surrender of its Warrants, that number of
      shares of Common Stock equal to the quotient obtained by dividing (x) the
      product of the number of shares of Common Stock underlying the surrendered
      Warrants, multiplied by the difference between the Fair Market Value and the
      Warrant Price by (y) the Fair Market Value. The “Fair Market Value” shall mean
      the average reported last sale price of the Common Stock for the 10 trading
      days
      ending on the 3rd trading day prior to (i) the date on which the notice of
      redemption is sent to holders of Warrant pursuant to Section 6 hereof or (ii)
      in
      the case of a cashless exercise at the option of a holder of Insider Warrants,
      the date on which such holder delivers an Election to Purchase.

     

    If
      any of
      (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to
      Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent
      after 5:00 P.M., New York City local time, on the specified Exercise Date,
      the
      Warrants will be deemed to be received and exercised on the Business Day next
      succeeding the Exercise Date. If the date specified as the Exercise Date is
      not
      a Business Day, the Warrants will be deemed to be received and exercised on
      the
      next succeeding day that is a Business Day. If the Warrants are received or
      deemed to be received after the Expiration Date, the exercise thereof will
      be
      null and void and any funds delivered to the Warrant Agent will be returned
      to
      the Holder or Participant, as the case may be, as soon as practicable. In no
      event will interest accrue on funds deposited with the Warrant Agent in respect
      of an exercise or attempted exercise of Warrants. The validity of any exercise
      of Warrants will be determined by the Company in its sole discretion and such
      determination will be final and binding upon the Holder and the Warrant Agent.
      Neither the Company nor the Warrant Agent shall have any obligation to inform
      a
      Holder of the invalidity of any exercise of Warrants.

     

    The
      Warrant Agent shall deposit all funds received by it in payment of the Warrant
      Price in the account of the Company maintained with the Warrant Agent for such
      purpose and shall advise the Company at the end of each day on which funds
      for
      the exercise of the Warrants are received of the amount so deposited to its
      account. The Warrant Agent shall promptly confirm such telephonic advice to
      the
      Company in writing.

     

    
      
        
        

      

      
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    (i)
      The
      Warrant Agent shall, by 11:00 A.M. on the Business Day following the Exercise
      Date of any Warrant, advise the Company and the transfer agent and registrar
      in
      respect of (a) the shares of Common Stock (the “Shares”)
      issuable upon such exercise as to the number of Warrants exercised in accordance
      with the terms and conditions of this Agreement, (b) the instructions of each
      Registered Holder or Participant, as the case may be, with respect to delivery
      of the Shares issuable upon such exercise, and the delivery of definitive
      Warrant Certificates, as appropriate, evidencing the balance, if any, of the
      Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant
      Certificate, the notation that shall be made to the records maintained by the
      Depository, its nominee for each Book-Entry Warrant Certificate, or a
      Participant, as appropriate, evidencing the balance, if any, of the Warrants
      remaining after such exercise and (d) such other information as the Company
      or
      such transfer agent and registrar shall reasonably require.

     

    (ii)
      The
      Company shall, by 5:00 P.M., New York City local time, on the third Business
      Day
      next succeeding the Exercise Date of any Warrant and the clearance of the funds
      in payment of the Warrant Price, execute, issue and deliver to the Warrant
      Agent, the Shares to which such Registered Holder or Participant, as the case
      may be, is entitled, in fully registered form, registered in such name or names
      as may be directed by such Registered Holder or the Participant, as the case
      may
      be. Upon receipt of such Shares, the Warrant Agent shall, by 5:00 P.M., New
      York
      City local time, on the fifth Business Day next succeeding such Exercise Date,
      transmit such Shares to or upon the order of the Registered Holder or
      Participant, as the case may be.

     

    In
      lieu
      of delivering physical certificates representing the Shares issuable upon
      exercise, provided the Company’s transfer agent is participating in the
      Depository Fast Automated Securities Transfer program, the Company shall use
      its
      reasonable best efforts to cause its transfer agent to electronically transmit
      the Shares issuable upon exercise to the Registered Holder or Participant by
      crediting the account of Registered Holder’s prime broker with Depository or of
      the Participant through its Deposit Withdrawal Agent Commission system. The
      time
      periods for delivery described in the immediately preceding paragraph shall
      apply to the electronic transmittals described herein. Notwithstanding the
      foregoing, the Company shall not be obligated to deliver any securities pursuant
      to the exercise of a Warrant unless a registration statement under the Act
      with
      respect to the Common Stock is effective. Warrants may not be exercised by,
      or
      securities issued to, any Registered Holder in any state in which such exercise
      would be unlawful. 

     

    
      Notwithstanding
        the foregoing, the Company shall not be obligated to deliver any securities
        pursuant to the exercise of any Warrants unless a registration statement
        under
        the Act with respect to the Common Stock issuable upon exercise of the Public
        Warrants is effective (and the prospectus contained therein is available
        for
        use). Warrants may not be exercised by, or securities issued to, any Registered
        Holder in any state in which such exercise would be unlawful. The exercise
        of
        the Warrants may only be settled by delivery of shares of Common Stock and
        the
        Registered Holders shall not be entitled to payment of cash in lieu of shares
        of
        Common Stock (net cash settlement) upon exercise of the Warrants pursuant
        to the
        terms of this Agreement or the Warrants regardless of whether the Common
        Stock
        underlying the Warrants is registered pursuant to an effective registration
        statement (and a prospectus relating thereto is available for use). For the
        avoidance of doubt, the Company shall not be obligated to deliver securities
        or
        otherwise settle the Warrants in the absence of an effective registration
        statement under the Act with respect to the Common Stock and a prospectus
        with
        respect to the Common Stock being available for use. 

       

    

    (iii)
      The
      accrual of dividends, if any, on the Shares issued upon the valid exercise
      of
      any Warrant will be governed by the terms generally applicable to the Shares.
      From and after the issuance of such Shares, the former Holder of the Warrants
      exercised will be entitled to the benefits generally available to other holders
      of Shares and such former Holder’s right to receive payments of dividends and
      any other amounts payable in respect of the Shares shall be governed by, and
      shall be subject to, the terms and provisions generally applicable to such
      Shares. 

     

    (iv)
      Warrants may be exercised only in whole numbers of Shares. No fractional shares
      of Common Stock are to be issued upon the exercise of the Warrant, but rather
      the number of shares of Common Stock to be issued shall be rounded up to the
      nearest whole number. If fewer than all of the Warrants evidenced by a Warrant
      Certificate are exercised, a new Warrant Certificate for the number of
      unexercised Warrants remaining shall be executed by the Company and
      countersigned by the Warrant Agent as provided in Section 2 hereof, and
      delivered to the holder of this Warrant Certificate at the address specified
      on
      the books of the Warrant Agent or as otherwise specified by such Registered
      Holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant
      Certificate are exercised, a notation shall be made to the records maintained
      by
      the Depository, its nominee for each Book-Entry Warrant Certificate, or a
      Participant, as appropriate, evidencing the balance of the Warrants remaining
      after such exercise.

     

    
      
        
        

      

      
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    (v)
      The
      Company shall not be required to pay any stamp or other tax or governmental
      charge required to be paid in connection with any transfer involved in the
      issue
      of the Shares upon the exercise of Warrants; and in the event that any such
      transfer is involved, the Company shall not be required to issue or deliver
      any
      Shares until such tax or other charge shall have been paid or it has been
      established to the Company’s satisfaction that no such tax or other charge is
      due.

     

    3.3.2   Issuance
      of Certificates.
      As soon
      as practicable after the exercise of any Warrant and the clearance of the funds
      in payment of the Warrant Price, the Company shall issue to the registered
      holder of such Warrant a certificate or certificates for the number of full
      shares of Common Stock to which he is entitled, registered in such name or
      names
      as may be directed by him, her or it, and if such Warrant shall not have been
      exercised in full, a new countersigned Warrant for the number of shares as
      to
      which such Warrant shall not have been exercised. Notwithstanding the foregoing,
      the Company shall not be obligated to deliver any securities pursuant to the
      exercise of a Warrant unless a registration statement under the Act with respect
      to the Common Stock is effective,
      subject
      to the Company’s satisfying its obligations under Section 7.4 to use its best
      efforts. In the event that a registration statement with respect to the Common
      Stock underlying the Warrants is not effective under the Act, or because such
      exercise would be unlawful with respect to a registered holder in any state,
      the
      holder of such Warrant shall not be entitled to exercise such Warrant and such
      Warrant may have no value and expire worthless. In no event will the Company
      be
      required to net cash settle the warrant exercise. Warrants may not be exercised
      by, or securities issued to, any registered holder in any state in which such
      exercise would be unlawful. The shares of common stock issuable upon exercise
      of
      Insiders’ Warrants shall be unregistered shares. In the event that a
      registration statement is not effective for the exercised Warrants, the
      purchaser of a unit containing such Warrant will have paid the full purchase
      price for the unit solely for the shares included in such unit.

     

     

    3.3.3   Valid
      Issuance.
      All
      shares of Common Stock issued upon the proper exercise of a Warrant in
      conformity with this Agreement shall be validly issued, fully paid and
      nonassessable.

     

    3.3.4   Date
      of Issuance.
      Each
      person in whose name any such certificate for shares of Common Stock is issued
      shall for all purposes be deemed to have become the holder of record of such
      shares on the date on which the Warrant was surrendered and payment of the
      Warrant Price was made, irrespective of the date of delivery of such
      certificate, except that, if the date of such surrender and payment is a date
      when the stock transfer books of the Company are closed, such person shall
      be
      deemed to have become the holder of such shares at the close of business on
      the
      next succeeding date on which the stock transfer books are open.

     

    4.   Adjustments.

     

    4.1   Stock
      Dividends - Split-Ups.
      If
      after the date hereof, and subject to the provisions of Section 4.6 below,
      the
      number of outstanding shares of Common Stock is increased by a stock dividend
      payable in shares of Common Stock, or by a split-up of shares of Common Stock,
      or other similar event, then, on the effective date of such stock dividend,
      split-up or similar event, the number of shares of Common Stock issuable on
      exercise of each Warrant shall be increased in proportion to such increase
      in
      outstanding shares of Common Stock.

     

    
      
        
        

      

      
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    4.2   Aggregation
      of Shares.
      If
      after the date hereof, and subject to the provisions of Section 4.6, the number
      of outstanding shares of Common Stock is decreased by a consolidation,
      combination, reverse stock split or reclassification of shares of Common Stock
      or other similar event, then, on the effective date of such consolidation,
      combination, reverse stock split, reclassification or similar event, the number
      of shares of Common Stock issuable on exercise of each Warrant shall be
      decreased in proportion to such decrease in outstanding shares of Common
      Stock.

     

    4.3   Adjustments
      in Exercise Price.
      Whenever the number of shares of Common Stock purchasable upon the exercise
      of
      the Warrants is adjusted, as provided in Section 4.1 and 4.2 above, the Warrant
      Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price
      immediately prior to such adjustment by a fraction (x) the numerator of which
      shall be the number of shares of Common Stock purchasable upon the exercise
      of
      the Warrants immediately prior to such adjustment, and (y) the denominator
      of
      which shall be the number of shares of Common Stock so purchasable immediately
      thereafter.

     

    4.4   Replacement
      of Securities upon Reorganization, etc.
      In case
      of any reclassification or reorganization of the outstanding shares of Common
      Stock (other than a change covered by Section 4.1 or 4.2 hereof or that
      solely affects the par value of such shares of Common Stock), or in the case
      of
      any merger or consolidation of the Company with or into another corporation
      (other than a consolidation or merger in which the Company is the continuing
      corporation and that does not result in any reclassification or reorganization
      of the outstanding shares of Common Stock), or in the case of any sale or
      conveyance to another corporation or entity of the assets or other property
      of
      the Company as an entirety or substantially as an entirety in connection with
      which the Company is dissolved, the Warrant holders shall thereafter have the
      right to purchase and receive, upon the basis and upon the terms and conditions
      specified in the Warrants and in lieu of the shares of Common Stock of the
      Company immediately theretofore purchasable and receivable upon the exercise
      of
      the rights represented thereby, the kind and amount of shares of stock or other
      securities or property (including cash) receivable upon such reclassification,
      reorganization, merger or consolidation, or upon a dissolution following any
      such sale or transfer, that the Warrant holder would have received if such
      Warrant holder had exercised his, her or its Warrant(s) immediately prior to
      such event; and if any reclassification also results in a change in shares
      of
      Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made
      pursuant to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of
      this
      Section 4.4 shall similarly apply to successive reclassifications,
      reorganizations, mergers or consolidations, sales or other
      transfers.

     

    4.5   Notices
      of Changes in Warrant.
      Upon
      every adjustment of the Warrant Price or the number of shares issuable upon
      exercise of a Warrant, the Company shall give written notice thereof to the
      Warrant Agent, which notice shall state the Warrant Price resulting from such
      adjustment and the increase or decrease, if any, in the number of shares
      purchasable at such price upon the exercise of a Warrant, setting forth in
      reasonable detail the method of calculation and the facts upon which such
      calculation is based. Upon the occurrence of any event specified in
      Sections 4.1, 4.2, 4.3 or 4.4, then, in any such event, the Company shall
      give written notice to the Warrant holder, at the last address set forth for
      such holder in the warrant register, of the record date or the effective date
      of
      the event. Failure to give such notice, or any defect therein, shall not affect
      the legality or validity of such event.

     

    
      
        
        

      

      
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    4.6   No
      Fractional Shares.
      Notwithstanding any provision contained in this Warrant Agreement to the
      contrary, the Company shall not issue fractional shares upon exercise of
      Warrants. If, by reason of any adjustment made pursuant to this Section 4,
      the
      holder of any Warrant would be entitled, upon the exercise of such Warrant,
      to
      receive a fractional interest in a share, the Company shall, upon such exercise,
      round up or down to the nearest whole number the number of the shares of Common
      Stock to be issued to the Warrant holder.

     

    4.7   Form
      of Warrant.
      The
      form of Warrant need not be changed because of any adjustment pursuant to this
      Section 4, and Warrants issued after such adjustment may state the same Warrant
      Price and the same number of shares as is stated in the Warrants initially
      issued pursuant to this Agreement. However, the Company may at any time in
      its
      sole discretion make any change in the form of Warrant that the Company may
      deem
      appropriate and that does not affect the substance thereof, and any Warrant
      thereafter issued or countersigned, whether in exchange or substitution for
      an
      outstanding Warrant or otherwise, may be in the form as so changed.

     

    5.   Transfer
      and Exchange of Warrants.

     

    5.1   Registration
      of Transfer.
      The
      Warrant Agent shall register the transfer, from time to time, of any outstanding
      Warrant upon the Warrant Register, upon surrender of such Warrant for transfer,
      properly endorsed with signatures properly guaranteed and accompanied by
      appropriate instructions for transfer. Upon any such transfer, a new Warrant
      representing an equal aggregate number of Warrants shall be issued and the
      old
      Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled
      shall
      be delivered by the Warrant Agent to the Company from time to time upon
      request.

     

    5.2   Procedure
      for Surrender of Warrants.
      Warrants may be surrendered to the Warrant Agent, together with a written
      request for exchange or transfer, and thereupon the Warrant Agent shall issue
      in
      exchange therefor one or more new Warrants as requested by the registered holder
      of the Warrants so surrendered, representing an equal aggregate number of
      Warrants; provided, however, that except as otherwise provided herein or in
      any
      Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be
      transferred only in whole and only to the Depository, to another nominee of
      the
      Depository, to a successor depository, or to a nominee of a successor
      depository; provided further, however, that in the event that a Warrant
      surrendered for transfer bears a restrictive legend, the Warrant Agent shall
      not
      cancel such Warrant and issue new Warrants in exchange therefor until the
      Warrant Agent has received an opinion of counsel for the Company stating that
      such transfer may be made and indicating whether the new Warrants must also
      bear
      a restrictive legend. Upon any such registration of transfer, the Company shall
      execute, and the Warrant Agent shall countersign and deliver, in the name of
      the
      designated transferee a new Warrant Certificate or Warrant Certificates of
      any
      authorized denomination evidencing in the aggregate a like number of unexercised
      Warrants.

     

    5.3   Fractional
      Warrants.
      The
      Warrant Agent shall not be required to effect any registration of transfer
      or
      exchange which will result in the issuance of a warrant certificate for a
      fraction of a warrant.

     

    5.4   Service
      Charges.
      No
      service charge shall be made for any exchange or registration of transfer of
      Warrants.

     

    
      
        
        

      

      
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          8
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    5.5   Warrant
      Execution and Countersignature.
      The
      Warrant Agent is hereby authorized to countersign and to deliver, in accordance
      with the terms of this Agreement, the Warrants required to be issued pursuant
      to
      the provisions of this Section 5, and the Company, whenever required by the
      Warrant Agent, will supply the Warrant Agent with Warrants duly executed on
      behalf of the Company for such purpose.

     

    6.   Redemption.

     

    6.1   Redemption.
      Subject
      to Section 6.4 hereof, not less than all of the outstanding Warrants may be
      redeemed, at the option of the Company, at any time after they become
      exercisable and prior to their expiration, at the office of the Warrant Agent,
      upon the notice referred to in Section 6.2, at the price of $.01 per Warrant
      (“Redemption
      Price”),
      provided that (a) the last sales price of the Common Stock has been at
      least $11.50 per share, on each of twenty (20) trading days within any
      thirty (30) trading day period ending on the third business day prior to the
      date on which notice of redemption is given,
      and (b)
      a registration statement under the Act relating to the shares of Common
      Stock issuable upon exercise of the Warrants is effective and expected to remain
      effective to and including the redemption date and a prospectus relating to
      the
      shares of Common Stock issuable upon exercise of the Warrants is available
      for
      use and expected to remain available for use to and including the redemption
      date. The provisions of this Section 6.1 may not be modified,
      amended or deleted without the prior written consent of Morgan
      Joseph.

     

    6.2   Date
      Fixed for, and Notice of, Redemption.
      In the
      event the Company shall elect to redeem all of the Warrants, the Company shall
      fix a date for the redemption. Notice of redemption shall be mailed by first
      class mail, postage prepaid, by the Company not less than 30 days prior to
      the date fixed for redemption to the registered holders of the Warrants to
      be
      redeemed at their last addresses as they shall appear on the registration books.
      Any notice mailed in the manner herein provided shall be conclusively presumed
      to have been duly given whether or not the registered holder received such
      notice.

     

    6.3   Exercise
      After Notice of Redemption.
      The
      Warrants may be exercised in accordance with Section 3 of this Agreement at
      any
      time after notice of redemption shall have been given by the Company pursuant
      to
      Section 6.2 hereof and prior to the time and date fixed for redemption. On
      and
      after the redemption date, the record holder of the Warrants shall have no
      further rights except to receive, upon surrender of the Warrants, the Redemption
      Price.

     

    6.4   Redemption
      of Purchase Option.
      Notwithstanding anything to the contrary contained herein or in that certain
      Unit Purchase Option, dated as of March , 2005 (the "Unit Purchase
      Option"), if the Company shall elect to redeem all of the Warrants,
      (i) Morgan Joseph’s option to purchase up to five hundred thousand (500,000)
      Units (as described in more detail in the Unit Purchase Option), if not earlier
      exercised in full, shall be automatically exercised, on a cashless basis as
      described in Section 2.3 thereof, immediately prior to the Redemption Date,
      and
      (ii) each Warrant that is part of a Unit issued thereunder upon such automatic
      conversion shall be redeemed by the Company as part of such redemption for
      the
      Redemption Price. 

     

    7.   Other
      Provisions Relating to Rights of Holders of Warrants.

     

    7.1   No
      Rights as Stockholder.
      A
      Warrant does not entitle the registered holder thereof to any of the rights
      of a
      stockholder of the Company, including, without limitation, the right to receive
      dividends, or other distributions, exercise any preemptive rights to vote or
      to
      consent or to receive notice as stockholders in respect of the meetings of
      stockholders or the election of directors of the Company or any other
      matter.

     

    
      
        
        

      

      
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    7.2   Lost,
      Stolen, Mutilated, or Destroyed Warrants.
      If any
      Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant
      Agent may on such terms as to indemnity or otherwise as they may in their
      discretion impose (which shall, in the case of a mutilated Warrant, include
      the
      surrender thereof), issue a new Warrant of like denomination, tenor, and date
      as
      the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant
      shall
      constitute a substitute contractual obligation of the Company, whether or not
      the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any
      time
      enforceable by anyone.

     

    7.3   Reservation
      of Common Stock.
      The
      Company shall at all times reserve and keep available a number of its authorized
      but unissued shares of Common Stock that will be sufficient to permit the
      exercise in full of all outstanding Warrants issued pursuant to this
      Agreement.

     

    7.4   Registration
      of Common Stock.
      The
      Company agrees that prior to the commencement of the Exercise Period, it shall
      file with the Securities and Exchange Commission a post-effective amendment
      to
      the Registration Statement, or a new registration statement, for the
      registration, under the Act, of, and it shall take such action as is necessary
      to qualify for sale, in those states in which the Warrants were initially
      offered by the Company, the Common Stock issuable upon exercise of the Warrants.
      In either case, the Company will use its best efforts to cause the same to
      become effective and to maintain the effectiveness of such registration
      statement until the expiration of the Warrants in accordance with the provisions
      of this Agreement (except in connection with a going private transaction).
      The
      provisions of this Section 7.4 may not be modified, amended or deleted
      without the prior written consent of Morgan Joseph.

     

    8.   Concerning
      the Warrant Agent and Other Matters.

     

    8.1   Payment
      of Taxes.
      The
      Company will from time to time promptly pay all taxes and charges that may
      be
      imposed upon the Company or the Warrant Agent in respect of the issuance or
      delivery of shares of Common Stock upon the exercise of Warrants, but the
      Company shall not be obligated to pay any transfer taxes in respect of the
      Warrants or such shares.

     

    8.2   Resignation,
      Consolidation, or Merger of Warrant Agent.

     

    8.2.1   Appointment
      of Successor Warrant Agent.
      The
      Warrant Agent, or any successor to it hereafter appointed, may resign its duties
      and be discharged from all further duties and liabilities hereunder after giving
      sixty (60) days’ notice in writing to the Company. If the office of the Warrant
      Agent becomes vacant by resignation or incapacity to act or otherwise, the
      Company shall appoint in writing a successor Warrant Agent in place of the
      Warrant Agent. If the Company shall fail to make such appointment within a
      period of 30 days after it has been notified in writing of such resignation
      or
      incapacity by the Warrant Agent or by the holder of the Warrant (who shall,
      with
      such notice, submit his Warrant for inspection by the Company), then the holder
      of any Warrant may apply to the Supreme Court of the State of New York for
      the
      County of New York for the appointment of a successor Warrant Agent at the
      Company’s cost. Any successor Warrant Agent, whether appointed by the Company or
      by such court, shall be a corporation organized and existing under the laws
      of
      the State of New York, in good standing and having its principal office in
      the
      Borough of Manhattan, City and State of New York, and authorized under such
      laws
      to exercise corporate trust powers and be subject to supervision or examination
      by federal or state authority. After appointment, any successor Warrant Agent
      shall be vested with all the authority, powers, rights, immunities, duties,
      and
      obligations of its predecessor Warrant Agent with like effect as if originally
      named as Warrant Agent hereunder, without any further act or deed; but if for
      any reason it becomes necessary or appropriate, the predecessor Warrant Agent
      shall execute and deliver, at the expense of the Company, an instrument
      transferring to such successor Warrant Agent all the authority, powers, and
      rights of such predecessor Warrant Agent hereunder; and upon request of any
      successor Warrant Agent the Company shall make, execute, acknowledge, and
      deliver any and all instruments in writing for more fully and effectually
      vesting in and confirming to such successor Warrant Agent all such authority,
      powers, rights, immunities, duties, and obligations.

     

    
      
        
        

      

      
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    8.2.2   Notice
      of Successor Warrant Agent.
      In the
      event a successor Warrant Agent shall be appointed, the Company shall give
      notice thereof to the predecessor Warrant Agent and the transfer agent for
      the
      Common Stock not later than the effective date of any such
      appointment.

     

    8.2.3   Merger
      or Consolidation of Warrant Agent.
      Any
      corporation into which the Warrant Agent may be merged or with which it may
      be
      consolidated or any corporation resulting from any merger or consolidation
      to
      which the Warrant Agent shall be a party shall be the successor Warrant Agent
      under this Agreement without any further act.

     

    8.3   Fees
      and Expenses of Warrant Agent.

     

    8.3.1   Remuneration.
      The
      Company agrees to pay the Warrant Agent reasonable remuneration for its services
      as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand
      for all expenditures that the Warrant Agent may reasonably incur in the
      execution of its duties hereunder.

     

    8.3.2   Further
      Assurances.
      The
      Company agrees to perform, execute, acknowledge, and deliver or cause to be
      performed, executed, acknowledged, and delivered all such further and other
      acts, instruments, and assurances as may reasonably be required by the Warrant
      Agent for the carrying out or performing of the provisions of this
      Agreement.

     

    8.4   Liability
      of Warrant Agent.

     

    8.4.1   Reliance
      on Company Statement.
      Whenever in the performance of its duties under this Warrant Agreement, the
      Warrant Agent shall deem it necessary or desirable that any fact or matter
      be
      proved or established by the Company prior to taking or suffering any action
      hereunder, such fact or matter (unless other evidence in respect thereof be
      herein specifically prescribed) may be deemed to be conclusively proved and
      established by a statement signed by the Chief Executive Officer, President
      or
      Chairman of the Board of the Company and delivered to the Warrant Agent. The
      Warrant Agent may rely upon such statement for any action taken or suffered
      in
      good faith by it pursuant to the provisions of this Agreement.

     

    8.4.2   Indemnity.
      The
      Warrant Agent shall be liable hereunder only for its own negligence, willful
      misconduct or bad faith. The Company agrees to indemnify the Warrant Agent
      and
      save it harmless against any and all liabilities, including judgments, costs
      and
      reasonable counsel fees, for anything done or omitted by the Warrant Agent
      in
      the execution of this Agreement except as a result of the Warrant Agent’s
      negligence, willful misconduct, or bad faith.

     

    
      
        
        

      

      
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          11
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    8.4.3   Exclusions.
      The
      Warrant Agent shall have no responsibility with respect to the validity of
      this
      Agreement or with respect to the validity or execution of any Warrant (except
      its countersignature thereof); nor shall it be responsible for any breach by
      the
      Company of any covenant or condition contained in this Agreement or in any
      Warrant; nor shall it be responsible to make any adjustments required under
      the
      provisions of Section 4 hereof or be responsible for the manner, method, or
      amount of any such adjustment or the ascertaining of the existence of facts
      that
      would require any such adjustment; nor shall it by any act hereunder be deemed
      to make any representation or warranty as to the authorization or reservation
      of
      any shares of Common Stock to be issued pursuant to this Agreement or any
      Warrant or as to whether any shares of Common Stock will when issued be valid
      and fully paid and nonassessable.

     

    8.5   Acceptance
      of Agency.
      The
      Warrant Agent hereby accepts the agency established by this Agreement and agrees
      to perform the same upon the terms and conditions herein set forth and among
      other things, shall account promptly to the Company with respect to Warrants
      exercised and concurrently account for, and pay to the Company, all moneys
      received by the Warrant Agent for the purchase of shares of the Company’s Common
      Stock through the exercise of Warrants.

     

    9.   Miscellaneous
      Provisions.

     

    9.1   Successors.
      All the
      covenants and provisions of this Agreement by or for the benefit of the Company
      or the Warrant Agent shall bind and inure to the benefit of their respective
      successors and assigns.

     

    9.2   Notices.
      Any
      notice, statement or demand authorized by this Warrant Agreement to be given
      or
      made by the Warrant Agent or by the holder of any Warrant to or on the Company
      shall be sufficiently given when so delivered if by hand or overnight delivery
      or if sent by certified mail or private courier service within five days after
      deposit of such notice, postage prepaid, addressed (until another address is
      filed in writing by the Company with the Warrant Agent), as
      follows:

     

    Global
      Technology Industries, Inc.

    375
      Park
      Avenue, Suite 1505

    New
      York,
      NY 10152

    Attn: President

     

    Any
      notice, statement or demand authorized by this Agreement to be given or made
      by
      the holder of any Warrant or by the Company to or on the Warrant Agent shall
      be
      sufficiently given when so delivered if by hand or overnight delivery or if
      sent
      by certified mail or private courier service within five days after deposit
      of
      such notice, postage prepaid, addressed (until another address is filed in
      writing by the Warrant Agent with the Company), as follows:

     

    Continental
      Stock Transfer & Trust Company

    17
      Battery Place

    New
      York,
      NY 10004

    Attn: Compliance
      Department

     

    with
      a
      copy in each case to:

     

    
      
        
        

      

      
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          12
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    Benesch,
      Friedlander, Coplan & Aronoff LLP

    2300
      BP
      Tower

    200
      Public Square

    Attn: Douglas
      Haas, Esq.

     

    and

     

    McDermott
      Will & Emery LLP

    340
      Madison Avenue

    New
      York,
      New York 10017

    Attn: Stephen
      Older, Esq.

     

    and

     

    Morgan
      Joseph & Co. Inc.

    600
      Fifth
      Avenue

    New
      York,
      New York 10020

    Attn: Michael
      Powell

     

    9.3   Applicable
      law.
      The
      validity, interpretation, and performance of this Agreement and of the Warrants
      shall be governed in all respects by the laws of the State of New York, without
      giving effect to conflict of laws. The Company hereby agrees that any action,
      proceeding or claim against it arising out of or relating in any way to this
      Agreement shall be brought and enforced in the courts of the State of New York
      or the United States District Court for the Southern District of New York,
      and
      irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
      The Company hereby waives any objection to such exclusive jurisdiction and
      that
      such courts represent an inconvenience forum. Any such process or summons to
      be
      served upon the Company may be served by transmitting a copy thereof by
      registered or certified mail, return receipt requested, postage prepaid,
      addressed to it at the address set forth in Section 9.2 hereof. Such
      mailing shall be deemed personal service and shall be legal and binding upon
      the
      Company in any action, proceeding or claim.

     

    9.4   Persons
      Having Rights under this Agreement.
      Nothing
      in this Agreement expressed and nothing that may be implied from any of the
      provisions hereof is intended, or shall be construed, to confer upon, or give
      to, any person or corporation other than the parties hereto and the registered
      holders of the Warrants and, for the purposes of Sections 2.5, 6.1, 6.4, 7.4
      and
      9.2 hereof, Morgan Joseph, any right, remedy, or claim under or by reason of
      this Warrant Agreement or of any covenant, condition, stipulation, promise,
      or
      agreement hereof. Morgan Joseph shall be deemed to be a third-party beneficiary
      of this Agreement with respect to Sections 2.5, 6.1, 6.4, 7.4 and 9.2
      hereof. All covenants, conditions, stipulations, promises, and agreements
      contained in this Warrant Agreement shall be for the sole and exclusive benefit
      of the parties hereto (and Morgan Joseph with respect to the Sections 2.5,
      6.1,
      6.4, 7.4 and 9.2 hereof) and their successors and assigns and of the registered
      holders of the Warrants.

     

    9.5   Examination
      of the Warrant Agreement.
      A copy
      of this Agreement shall be available at all reasonable times at the office
      of
      the Warrant Agent in the Borough of Manhattan, City and State of New York,
      for
      inspection by the registered holder of any Warrant. The Warrant Agent may
      require any such holder to submit his Warrant for inspection by it.

     

    
      
        
        

      

      
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    9.6   Counterparts.
      This
      Agreement may be executed in any number of counterparts and each of such
      counterparts shall for all purposes be deemed to be an original, and all such
      counterparts shall together constitute but one and the same
      instrument.

     

    9.7   Effect
      of Headings.
      The
      Section headings herein are for convenience only and are not part of this
      Warrant Agreement and shall not affect the interpretation thereof.

     

    
      
        
        

      

      
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          14
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    IN
      WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
      as
      of the day and year first above written.

     

    
      	
              Attest:

               

               

              GLOBAL TECHNOLOGY INDUSTRIES, INC..

               

               

            	 	 	 
	By:	 	 	 
	
              

            	 	 	
            
	Name: Robert
              B. Kay
Title: President	 	 	 

    

     

    
       

      
        	
                Attest:

                 

                 

                CONTINENTAL STOCK TRANSFER & TRUST
                  COMPANY

                 

                 

              	 	 	 
	By:	 	 	 
	
                

              	 	 	
              
	Name: 
Title: 	 	 	 

      

       

    

    
      
        
        

      

      
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          15
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    Exhibit
      A

    Form
      of Warrant

     

     

     

    
      
        
        

      

      
        A-1THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SCIENCE DYNAMICS CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.

               AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE

      FOR VALUE RECEIVED, SCIENCE DYNAMICS CORPORATION, a Delaware corporation
(the "BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the "HOLDER") or
its registered assigns or successors in interest, on order, the sum of Two
Million Dollars ($2,000,000), together with any accrued and unpaid interest
hereon, on February 11, 2008 (the "MATURITY DATE") if not sooner paid. This Note
amends and restates in its entirety, and is given in substitution for and not in
satisfaction of that certain promissory note in the original principal amount of
$2,000,000 issued by the Company in favor of the Holder on February 11, 2005.

      Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (as amended, modified or
supplemented from time to time, the "PURCHASE AGREEMENT").

The following terms shall apply to this Amended and Restated Secured Convertible
Term Note (this "NOTE"):

                                    ARTICLE I
                             INTEREST & AMORTIZATION

      1.1(a) Interest Rate. Subject to Sections 4.11 and 5.6 hereof, interest
payable on this Note shall accrue at a rate per annum (the "Interest Rate")
equal to the "prime rate" published in The Wall Street Journal from time to
time, plus three percent (3%). The prime rate shall be increased or decreased as
the case may be for each increase or decrease in the prime rate in an amount
equal to such increase or decrease in the prime rate; each change to be
effective as of the day of the change in such rate. Subject to Section 1.1(b)
hereof, the Interest Rate shall not be less than eight percent (8.0%). Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on March 1, 2005 and on the first business day
of each consecutive calendar month thereafter until the Maturity Date (and on
the Maturity Date), whether by acceleration or otherwise (each, a "REPAYMENT
DATE").

                                        1
<PAGE>

      1.1 (b) Interest Rate Adjustment. The Interest Rate shall be calculated on
the last business day of each month hereafter until the Maturity Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant issued to
Holder on a registration statement declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii) the market price (the "Market Price")
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2.0.%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. Notwithstanding
the foregoing (and anything to the contrary contained in herein), in no event
shall the Interest Rate be less than zero percent (0%).

      1.2 Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on June 1, 2005 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "AMORTIZATION Date"). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $60,606.06, together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other amounts which are then owing under this Note, the Purchase Agreement
or any other Related Agreement but have not been paid (collectively, the
"MONTHLY AMOUNT"). Any Principal Amount that remains outstanding on the Maturity
Date shall be due and payable on the Maturity Date.

                                   ARTICLE II
                              CONVERSION REPAYMENT

      2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the Monthly
Amount (or a portion thereof of such Monthly Amount if such portion of the
Monthly Amount would have been converted into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Borrower shall pay the Holder an amount equal to 102% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Borrower to the Holder on such Repayment Date (in
respect of such portion of the Monthly Amount converted into in shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(x) the portion of the Monthly Amount converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion Price. For purposes hereof, the "FIXED
CONVERSION PRICE" means (x) in respect of the first $500,000 of principal amount
converted under the terms of this Note, $0.06 and (y) in respect of the
remaining principal amount outstanding under this Note, $0.10.

                                        2
<PAGE>

      (b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1(a), 2.2,
and 3.2 hereof, the Holder shall convert into shares of Common Stock all or a
portion of the Monthly Amount due on each Repayment Date according to the
following guidelines (the "CONVERSION CRITERIA"): (i) the closing price of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market on the date
such Repayment Date shall be greater than or equal to 115% of the Fixed
Conversion Price and (ii) the amount of such conversion does not exceed twenty
five percent (25%) of the aggregate dollar trading volume of the Common Stock
for the twenty two (22) day trading period immediately preceding the applicable
Repayment Date. If the Conversion Criteria are not met, the Holder shall convert
only such part of the Monthly Amount that meets the Conversion Criteria. Any
part of the Monthly Amount due on a Repayment Date that the Holder has not been
able to convert into shares of Common Stock due to failure to meet the
Conversion Criteria, shall be paid by the Borrower in cash at the rate of 102%
of the Monthly Amount otherwise due on such Repayment Date, within three (3)
business days of the applicable Repayment Date.

      2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, none of the Borrower's obligations to the Holder may be converted into
Common Stock unless (i) either (x) an effective current Registration Statement
(as defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in connection with satisfaction of such obligations exists or
(y) an exemption from registration of the Common Stock is available to pursuant
to Rule 144 of the Securities Act and (ii) no Event of Default hereunder exists
and is continuing, unless such Event of Default is cured within any applicable
cure period or is otherwise waived in writing by the Holder in whole or in part
at the Holder's option.

      2.3 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to one hundred thirty percent (130%) of the principal amount of this
Note together with accrued but unpaid interest thereon and any and all other
sums due, accrued or payable to the Holder arising under this Note, the Purchase
Agreement, or any Related Agreement (the "REDEMPTION AMOUNT") outstanding on the
Redemption Payment Date (as defined below). The Borrower shall deliver to the
Holder a written notice of redemption (the "NOTICE OF REDEMPTION") specifying
the date for such Optional Redemption (the "REDEMPTION PAYMENT DATE"), which
date shall be ten (10) business days after the date of the Notice of Redemption
(the "REDEMPTION PERIOD"). A Notice of Redemption shall not be effective with
respect to any portion of this Note for which the Holder has a pending election
to convert pursuant to Section 3.1, or for conversions initiated or made by the
Holder pursuant to Section 3.1 during the Redemption Period. The Redemption
Amount shall be determined as if such Holder's conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount must be paid in good funds to the
Holder. In the event the Borrower fails to pay the Redemption Amount on the
Redemption Payment Date as set forth herein, then such Redemption Notice will be
null and void.

                                        3
<PAGE>

                                   ARTICLE III
                                CONVERSION RIGHTS

      3.1. Holder's Conversion Rights. The Holder shall have the right, but not
the obligation, to convert all or any portion of the then aggregate outstanding
principal amount of this Note, together with interest and fees due hereon, into
shares of Common Stock subject to the terms and conditions set forth in this
Article III. The Holder may exercise such right by delivery to the Borrower of a
written notice of conversion not less than one (1) day prior to the date upon
which such conversion shall occur. The shares of Common Stock to be issued upon
such conversion are herein referred to as the "CONVERSION SHARES."

      3.2 Conversion Limitation. Notwithstanding anything herein to the
contrary, in no event shall the Holder be entitled to convert any portion of
this Note in excess of that portion of this Note upon exercise of which the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of this Note
or the unexercised or unconverted portion of any other security of the Holder
subject to a limitation on conversion analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its Affiliates of any amount greater than 9.99% of the then
outstanding shares of Common Stock (whether or not, at the time of such
conversion, the Holder and its Affiliates beneficially own more than 9.99% of
the then outstanding shares of Common Stock). As used herein, the term
"AFFILIATE" means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. For purposes of the proviso to the second preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
limitations set forth herein (x) may be waived by the Holder upon provision of
no less than seventy-five (75) days prior notice to the Company and (y) shall
automatically become null and void (i) following notice to the Company upon the
occurrence and during the continuance of an Event of Default, or (ii) upon
receipt by the Holder of a Notice of Redemption.

      3.3 Mechanics of Holder's Conversion. (a) In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion
("NOTICE OF CONVERSION") to the Borrower and such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees being converted. On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the Holder shall make
the appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION
DATE"). A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.

                                        4
<PAGE>

      (b) Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel
within one (1) business day of the date of the delivery to Borrower of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "DELIVERY DATE"). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such Common Stock, unless the Holder provides the Borrower written
instructions to the contrary.

      3.4 Conversion Mechanics.

      (a) The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the then applicable Fixed
Conversion Price. In the event of any conversions of outstanding principal
amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding principal amount
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.

      (b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:

      A. Stock Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of shares of Common
Stock, or if a dividend is paid on the Common Stock or any preferred stock
issued by the Borrower in shares of Common Stock, the Fixed Conversion Price or
the Conversion Price, as the case may be, shall be proportionately reduced in
case of subdivision of shares or stock dividend or proportionately increased in
the case of combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.

      B. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.

                                        5
<PAGE>

      C. Share Issuances. Subject to the provisions of this Section 3.4, if the
Borrower shall at any time prior to the conversion or repayment in full of the
Principal Amount issue any shares of Common Stock or securities convertible into
Common Stock to a person other than the Holder (except (i) pursuant to
Subsections A or B above; (ii) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; or (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan adopted
by the Borrower) for a consideration per share (the "Offer Price") less than the
Fixed Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset to such lower Offer Price at the
time of issuance of such securities For purposes hereof, the issuance of any
security of the Borrower convertible into or exercisable or exchangeable for
Common Stock shall result in an adjustment to the Fixed Conversion Price at the
time of issuance of such securities.

      D. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.

      3.5 Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. Subject
to the provisions of Article IV, the Borrower will pay no costs, fees or any
other consideration to the Holder for the production and issuance of a new Note.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

      Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, the amount
due and owing to the Holder shall be 130% of the outstanding principal amount of
the Note (plus accrued and unpaid interest and fees, if any) (the "DEFAULT
PAYMENT"). The Default Payment shall be applied first to any fees due and
payable to Holder pursuant to the Note or the Related Agreements, then to
accrued and unpaid interest due on the Note and then to outstanding principal
balance of the Note.

                                        6
<PAGE>

      The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "EVENT OF DEFAULT":

      4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails
to pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower, and in any such case, such failure
shall continue for a period of three (3) days following the date upon which any
such payment was due.

      4.2 Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and, in
any such case, such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof.

      4.3 Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the date that such
representation or warranty was made or deemed made.

      4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.

      4.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of thirty (30) days.

      4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries.

      4.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock).

                                        7
<PAGE>

      4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).

      4.9 Default Under Related Agreements or Other Agreements. The occurrence
and continuance of any Event of Default (as defined in the Purchase Agreement or
any Related Agreement) or any event of default (or similar term) under any other
indebtedness.

      4.10 Change in Control. The occurrence of a change in the controlling
ownership of the Borrower.

                           DEFAULT RELATED PROVISIONS

      4.11 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Borrower shall pay additional interest
on this Note in an amount equal to two percent (2%) per month, and all
outstanding obligations under this Note, including unpaid interest, shall
continue to accrue such additional interest from the date of such Event of
Default until the date such Event of Default is cured or waived.

      4.12 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.

      4.13 Cumulative Remedies. The remedies under this Note shall be
cumulative.

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

      5.2 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.

                                        8
<PAGE>

      5.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.

      5.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.

      5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the State of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.

      5.6 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

      5.7 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated
as of the date hereof.

                                        9
<PAGE>

      5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

      5.9 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.

       [Balance of page intentionally left blank; signature page follows.]

                                       10
<PAGE>

      IN WITNESS WHEREOF, the Borrower has caused this Amended and Restated
Convertible Term Note to be signed in its name effective as of the 11th day of
February, 2005.

                                                 SCIENCE DYNAMICS CORPORATION

                                                 By:    /s/ Paul Burgess
                                                        -----------------------
                                                 Name:  Paul Burgess
                                                        -----------------------
                                                 Title: Chief Executive Officer
                                                        -----------------------

WITNESS:

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

                                       11
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Amended and Restated Convertible Term Note
issued by SCIENCE DYNAMICS CORPORATION dated February 11, 2005 and amended and
restated as of June __, 2006 by delivery of Shares of Common Stock of SCIENCE
DYNAMICS CORPORATION on and subject to the conditions set forth in Article III
of such Note.

1.    Date of Conversion          _______________________

2.    Shares To Be Delivered:     _______________________

                                             By:____________________________
                                             Name:__________________________
                                             Title:_________________________

                                       12

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