SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
Science Dynamics Corporation
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SCIENCE DYNAMICS CORPORATION
2059 Springdale Road, Suite 100, Cherry Hill, New Jersey 08003
INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO SEND US A PROXY
Cherry Hill, New Jersey
November 12, 2002
This information statement has been mailed on or about November 12, 2002
to the stockholders of record on November 6, 2002 (the "Record Date") of
Science Dynamics Corporation, a Delaware corporation (the
"Company") in connection with certain actions to be taken by the written consent
by the majority stockholders of the Company, dated by and through
November 6, 2002. The actions to be taken pursuant to the written consent
shall be taken on or about December 3, 2002, 20 days after the mailing of this
information statement.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED HEREIN.
By Order of the Board of Directors,
/s/ ALAN C. BASHFORTH
Secretary
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NOTICE OF ACTION TO BE TAKEN PURSUANT THE WRITTEN CONSENT OF
MAJORITY STOCKHOLDERS IN LIEU OF A SPECIAL MEETING OF THE
STOCKHOLDERS, DATED BY AND THROUGH NOVEMBER 6, 2002
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the following action will be taken pursuant to the
written consent of a majority of stockholders dated by and through
November 6, 2002, in lieu of a special meeting of the stockholders. Such action
will be taken on or about December 3, 2002:
1. The Company's Certificate of Incorporation, as amended, will be amended as
follows:
(a) increase the number of authorized shares of common stock, par value $.01
per share (the "Common Stock") of the Company from 45,000,000 shares to
200,000,000 shares; and
(b) authorize the creation of 10,000,000 shares of blank check preferred
stock.
2. To approve the Company's 2002 Employee Stock Option Plan and reserve up to
20,000,000 shares of Common Stock for issuance thereunder.
3. To approve the Company's 2002 Employee Stock Purchase Plan and to reserve
up to 20,000,000 shares of Common Stock for issuance thereunder.
OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, the Company's authorized capitalization consisted of
45,000,000 shares of common stock, $.01 par value per share (the "Common Stock")
, of which 40,573,099 shares were issued and outstanding as of the Record Date.
Holders of Common Stock of the Company have no preemptive rights to acquire or
subscribe to any of the additional shares of Common Stock.
Each share of Common Stock entitles its holder to one vote on each matter
submitted to the stockholders. However, because stockholders holding at least
a majority of the voting rights of all outstanding shares of capital stock as
at the Record Date have voted in favor of the foregoing proposals by
resolution dated by and through November 6, 2002; and having sufficient voting
power to approve such proposals through their ownership of capital stock, no
other stockholder consents will be solicited in connection with this
Information Statement.
Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as amended,
the proposals will not be adopted until a date at least 20 days after the date
on which this Information Statement has been mailed to the stockholders. The
Company anticipates that the actions contemplated herein will be effected on or
about the close of business on December 3, 2002.
The Company has asked brokers and other custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of the Common Stock
held of record by such persons and will reimburse such persons for out-of-pocket
expenses incurred in forwarding such material.
This Information Statement will serve as written notice to stockholders pursuant
to Section 222 of the General Corporation Law of the State of Delaware.
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AMENDMENT TO THE CERTIFICATE OF INCORPORATION
As of November 6, 2002, the majority stockholders of the Company approved an
amendment to the Company's Certificate of Incorporation, as amended, to increase
the number of authorized shares of Common Stock from 45,000,000 to 200,000,000
and to authorize the creation of 10,000,000 shares of "blank check" preferred
stock. The Company currently has authorized capital stock of 45,000,000 shares
and approximately 40,783,590 shares of Common Stock are outstanding as of the
Record Date. The Board believes that the increase in authorized common shares
would provide the Company greater flexibility with respect to the Company's
capital structure for such purposes as additional equity financing, and stock
based acquisitions. The Company anticipates that the "blank check" preferred
stock will be designated into classes as deemed appropriate by the Company in
the future.
INCREASE IN AUTHORIZED COMMON STOCK
The terms of the additional shares of Common Stock will be identical to those of
the currently outstanding shares of Common Stock. However, because holders of
Common Stock have no preemptive rights to purchase or subscribe for any unissued
stock of the Company, the issuance of additional shares of Common Stock will
reduce the current stockholders' percentage ownership interest in the total
outstanding shares of Common Stock. This amendment and the creation of
additional shares of authorized common stock will not alter the current number
of issued shares. The relative rights and limitations of the shares of Common
Stock will remain unchanged under this amendment.
As of the Record Date, a total of 40,573,099 shares of the Company's currently
authorized 45,000,000 shares of Common Stock are issued and outstanding. The
increase in the number of authorized but unissued shares of Common Stock would
enable the Company, without further stockholder approval, to issue shares from
time to time as may be required for proper business purposes, such as raising
additional capital for ongoing operations, business and asset acquisitions,
stock splits and dividends, present and future employee benefit programs and
other corporate purposes.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon
the exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of
additional shares to certain persons allied with the Company's management
could have the effect of making it more difficult to remove the Company's
current management by diluting the stock ownership or voting rights of
persons seeking to cause such removal. The Board of Directors is not aware
of any attempt, or contemplated attempt, to acquire control of the Company,
and this proposal is not being presented with the intent that it be utilized
as a type of anti- takeover device.
There are currently no plans, arrangements, commitments or understandings for
the issuance of the additional shares of Common Stock which are proposed to
be authorized.
Stockholders do not have any preemptive or similar rights to subscribe for or
purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
- -3-
CREATION OF BLANK CHECK PREFERRED STOCK
The amendment to the Company's Certificate of Incorporation, as amended, will
create 10,000,000 authorized shares of "blank check" preferred stock. The
proposed Amendment to the Company's Certificate of Incorporation, as amended,
attached as Exhibit "A" to this Information Statement contains provisions
related to the "blank check" preferred stock. The following summary does not
purport to be complete and is qualified in its entirety by reference to the
proposed Certificate of Amendment to the Certificate of Incorporation as set
forth in Exhibit "A."
The term "blank check" refers to preferred stock, the creation and issuance of
which is authorized in advance by the stockholders and the terms, rights and
features of which are determined by the Board of Directors of the Company upon
issuance. The authorization of such blank check preferred stock would permit
the Board of Directors to authorize and issue preferred stock from time to
time in one or more series.
Subject to the provisions of the Company's Certificate of Amendment to the
Certificate of Incorporation and the limitations prescribed by law, the Board
of Directors would be expressly authorized, at its discretion, to adopt
resolutions to issue shares, to fix the number of shares and to change the
number of shares constituting any series and to provide for or change the
voting powers, designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, including dividend rights (including whether the dividends are
cumulative), dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights and liquidation preferences
of the shares constituting any series of the preferred stock, in
each case without any further action or vote by the stockholders. The Board
of Directors would be required to make any determination to issue shares of
preferred stock based on its judgment as to the best interests of the Company
and its stockholders. The amendment to the Certificate of Incorporation, as
amended, would give the Board of Directors flexibility, without further
stockholder action, to issue preferred stock on such terms and conditions as
the Board of Directors deems to be in the best interests of the Company and
its stockholders.
The amendment will provide the Company with increased financial flexibility
in meeting future capital requirements by providing another type of security
in addition to its Common Stock, as it will allow preferred stock to be
available for issuance from time to time and with such features as determined
by the Board of Directors for any proper corporate purpose. It is anticipated
that such purposes may include exchanging preferred stock for Common Stock
and, without limitation, may include the issuance for cash as a means of
obtaining capital for use by the Company, or issuance as part or all of the
consideration required to be paid by the Company for acquisitions of other
businesses or assets.
Any issuance of preferred stock with voting rights could, under certain
circumstances, have the effect of delaying or preventing a change in control
of the Company by increasing the number of outstanding shares entitled to vote
and by increasing the number of votes required to approve a change in control
of the Company. Shares of voting or convertible preferred stock could be
issued, or rights to purchase such shares could be issued, to render more
difficult or discourage an attempt to obtain control of the Company by means
of a tender offer, proxy contest, merger or otherwise. The ability of the
Board of Directors to issue such additional shares of preferred stock, with
the rights and preferences it deems advisable, could discourage an attempt
by a party to acquire control of the Company by tender offer or other means.
Such issuances could therefore deprive stockholders of benefits that could
result from such an attempt, such as the realization of a premium over the
market price that such an attempt could cause. Moreover, the issuance of such
additional shares of preferred stock to persons friendly to the Board of
Directors could make it more difficult to remove incumbent managers and
directors from office even if such change were to be favorable to
stockholders generally.
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While the amendment may have anti-takeover ramifications, the Board of Directors
believes that the financial flexibility offered by the amendment outweighs any
disadvantages. To the extent that the amendment may have anti-takeover effects,
the amendment may encourage persons seeking to acquire the Company to negotiate
directly with the Board of Directors enabling the Board of Directors to consider
the proposed transaction in a manner that best serves the stockholders'
interests.
The Company has no present plans, arrangements, commitments or understandings
for the issuance of additional shares of Preferred Stock.
APPROVAL OF THE 2002 EMPLOYEE STOCK OPTION PLAN
As of November 6, 2002, the majority stockholders of the Company authorized
the 2002 Employee Stock Option Plan (the "2002 Employee Stock Option Plan")
and authorized 20,000,000 shares of Common Stock to be reserved for issuance
thereunder. The following is a summary of principal features of the 2002
Employee Stock Option Plan. The summary, however, does not purport to be
a complete description of all the provisions of the 2002 Employee Stock
Option Plan. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Company's
Secretary, Alan C. Bashforth, at the Company's principal offices at
2059 Springdale Road, Suite 100, Cherry Hill, New Jersey 08003.
GENERAL
The 2002 Employee Stock Option Plan was adopted by the Board of Directors
on August 13, 2002. The Board of Directors has initially reserved 20,000,000
shares of Common Stock for issuance under the 2002 Employee Stock Option Plan.
Under the Plan, options may be granted which are intended to qualify as
Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue
Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify
as Incentive Stock Options thereunder.
The 2002 Employee Stock Option Plan and the right of participants to make
purchases thereunder are intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). The 2002 Employee Stock Option Plan is not a qualified
deferred compensation plan under Section 401(a) of the Internal Revenue Code
and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
PURPOSE
The primary purpose of the 2002 Employee Stock Option Plan is to attract
and retain the best available personnel for the Company in order to promote
the success of the Company's business and to facilitate the ownership of the
Company's stock by employees. In the event that the 2002 Employee Stock
Option Plan is not adopted the Company may have considerable difficulty in
attracting and retaining qualified personnel, officers, directors and
consultants.
ADMINISTRATION
The 2002 Employee Stock Option Plan, when approved, will be administered
by the Company's Board of Directors, as the Board of Directors may be composed
from time to time. All questions of interpretation of the 2002 Employee Stock
Option Plan are determined by the Board, and its decisions are final and
binding upon all participants. Any determination by a majority of the members
of the Board of Directors at any meeting, or by written consent in lieu of a
meeting, shall be deemed to have been made by the whole Board of Directors.
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Notwithstanding the foregoing, the Board of Directors may at any time, or from
time to time, appoint a committee (the "Committee") of at least two members of
the Board of Directors, and delegate to the Committee the authority of the Board
of Directors to administer the Plan. Upon such appointment and delegation,
the Committee shall have all the powers, privileges and duties of the Board of
Directors, and shall be substituted for the Board of Directors, in the
administration of the Plan, subject to certain limitations.
Members of the Board of Directors who are eligible employees are permitted to
participate in the 2002 Employee Stock Option Plan, provided that any such
eligible member may not vote on any matter affecting the administration of the
2002 Employee Stock Option Plan or the grant of any option pursuant to it, or
serve on a committee appointed to administer the 2002 Employee Stock Option
Plan. In the event that any member of the Board of Directors is at any time not
a "disinterested person", as defined in Rule 16b-3(c)(3)(i) promulgated
pursuant to the Securities Exchange Act of 1934, the Plan shall not be
administered by the Board of Directors, and may only by administered by a
Committee, all the members of which are disinterested persons, as so defined.
ELIGIBILITY
Under the 2002 Employee Stock Option Plan, options may be granted to key
employees, officers, directors or consultants of the Company, as provided in
the 2002 Employee Stock Option Plan.
TERMS OF OPTIONS
The term of each Option granted under the Plan shall be contained in a stock
option agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the
Plan, including the following:
(a) Purchase Price. The purchase price of the Common Shares subject to each
ISO shall not be less than the fair market value (as set forth in the 2002
Employee Stock Option Plan), or in the case of the grant of an ISO to a
Principal Stockholder, not less than 110% of fair market value of such Common
Shares at the time such Option is granted. The purchase price of the Common
Shares subject to each Non-ISO shall be determined at the time such Option is
granted, but in no case less than 85% of the fair market value of such Common
Shares at the time such Option is granted. The purchase price of the Common
Shares subject to each Non-ISO.
(b) Vesting. The dates on which each Option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Board of Directors, in its discretion, at the time such Option is
granted.
(c) Expiration. The expiration of each Option shall be fixed by the Board of
Directors, in its discretion, at the time such Option is granted; however,
unless otherwise determined by the Board of Directors at the time such Option
is granted, an Option shall be exercisable for ten (10) years after the date
on which it was granted (the "Grant Date"). Each Option shall be subject to
earlier termination as expressly provided in the 2002 Employee Stock
Option Plan or as determined by the Board of Directors, in its discretion,
at the time such Option is granted.
(d) Transferability. No Option shall be transferable, except by will or the
laws of descent and distribution, and any Option may be exercised during the
lifetime of the Optionee only by him. No Option granted under the Plan shall
be subject to execution, attachment or other process.
(e) Option Adjustments. The aggregate number and class of shares as to which
Options may be granted under the Plan, the number and class shares covered by
each outstanding Option and the exercise price per share thereof (but not the
total price), and all such Options, shall each be proportionately adjusted
for any increase decrease in the number of issued Common Shares resulting
from split-up spin-off or consolidation of shares or any like Capital
adjustment or the payment of any stock dividend.
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Except as otherwise provided in the 2002 Employee Stock Option Plan, any
Option granted hereunder shall terminate in the event of a merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation of the Company. However, the Optionee shall have the right
immediately prior to any such transaction to exercise his Option in whole or
in part notwithstanding any otherwise applicable vesting requirements.
(f) Termination, Modification and Amendment. The 2002 Employee Stock Option
Plan (but not Options previously granted under the Plan) shall terminate
ten (10) years from the earlier of the date of its adoption by the Board of
Directors or the date on which the Plan is approved by the affirmative vote
of the holders of a majority of the outstanding shares of capital stock of
the Company entitled to vote thereon, and no Option shall be granted after
termination of the Plan. Subject to certain restrictions, the Plan may at
any time be terminated and from time to time be modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares of
the capital stock of the Company present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of the
State of Delaware.
FEDERAL INCOME TAX ASPECTS OF THE 2002 EMPLOYEE STOCK OPTION PLAN
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES
UNDER THE 2002 EMPLOYEE STOCK OPTION PLAN. THIS SUMMARY DOES NOT PURPORT TO
BE COMPLETE AND DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO
TAXPAYERS WITH SPECIAL TAX STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS
THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT
OR OTHER TAX CONSEQUENCES OTHER THAN INCOME TAX CONSEQUENCES. THE COMPANY
ADVISES EACH PARTICIPANT TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
TAX CONSEQUENCES OF PARTICIPATION IN THE 2002 EMPLOYEE STOCK OPTION PLAN AND
FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
The 2002 Employee Stock Option Plan and the right of participants to make
purchases thereunder are intended to qualify under the provisions of Sections
421, 422 and 423 of the Code. Under these provisions, no income will be
recognized by a participant prior to disposition of shares acquired under the
2002 Employee Stock Option Plan.
If the shares are sold or otherwise disposed of (including by way of gift)
more than two years after the first day of the offering period during which
shares were purchased (the "Offering Date"), a participant will recognize as
ordinary income at the time of such disposition the lesser of (a) the excess
of the fair market value of the shares at the time of such disposition over
the purchase price of the shares or (b) 15% of the fair market value of the
shares on the first day of the offering period. Any further gain or loss
upon such disposition will be treated as long-term capital gain or loss. If
the shares are sold for a sale price less than the purchase price, there is
no ordinary income and the participant has a capital loss for the difference.
If the shares are sold or otherwise disposed of (including by way of gift)
before the expiration of the two-year holding period described above, the
excess of the fair market value of the shares on the purchase date over the
purchase price will be treated as ordinary income to the participant. This
excess will constitute ordinary income in the year of sale or other disposition
even if no gain is realized on the sale or a gift of the shares is made. The
balance of any gain or loss will be treated as capital gain or loss and will
be treated as long-term capital gain or loss if the shares have been held more
than one year.
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In the case of a participant who is subject to Section 16(b) of the
Exchange Act, the purchase date for purposes of calculating such participant's
compensation income and beginning of the capital gain holding period may be
deferred for up to six months under certain circumstances. Such individuals
should consult with their personal tax advisors prior to buying or selling
shares under the 2002 Employee Stock Option Plan.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares
for the purpose of determining capital gain or loss on a sale or exchange of
the shares.
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that ordinary income must be
reported upon disposition of shares by the participant before the expiration
of the two-year holding period described above.
RESTRICTIONS ON RESALE
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act.
The Common Stock acquired under the 2002 Employee Stock Option Plan by an
affiliate may be reoffered or resold only pursuant to an effective
registration statement or pursuant to Rule 144 under the Securities Act
or another exemption from the registration requirements of the
Securities Act.
APPROVAL OF THE 2002 EMPLOYEE STOCK PURCHASE PLAN
As of November 6, 2002, the majority stockholders of the Company authorized
the 2002 Employee Stock Purchase Plan (the "2002 Employee Stock Purchase Plan")
and authorized 20,000,000 shares of Common Stock for issuance thereunder. The
following is a summary of principal features of the 2002 Employee Stock
Purchase Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 2002 Employee Stock Purchase Plan .
Any stockholder of the Company who wishes to obtain a copy of the actual plan
document may do so upon written request to the Company's Secretary,
Alan C. Bashforth, at the Company's principal offices at 2059 Springdale Road,
Suite 100, Cherry Hill, New Jersey 08003.
GENERAL
The Company's 2002 Employee Stock Purchase Plan is designed to
encourage the purchase by participants of shares of Common Stock. The 2002
Employee Stock Purchase Plan is intended to comply with the requirements of
Section 423 of the Code, and to assure the participants of the tax advantages
provided thereby (and described below in the section entitled "Certain
Federal Income Tax Consequences"). In order for the transfer of stock under
the 2002 Employee Stock Purchase Plan to qualify for this treatment, the 2002
Employee Stock Purchase Plan must be approved by stockholders of the
Company within 12 months of the plan's adoption. A total of 20,000,000 shares
of Common Stock will be authorized for issuance under the 2002 Employee Stock
Purchase Plan.
The number of shares of Common Stock initially authorized for
issuance under the related 2002 Employee Stock Purchase Plan are subject to
adjustment by the Committee in the event of a recapitalization, stock split,
stock dividend or similar corporate transaction.
ELIGIBILITY
Subject to certain procedural requirements, all employees of the Company who
have at least one year of service and work more than 30 hours per week will
be eligible to participate in the 2002 Employee Stock Purchase Plan, except
that employees who are "highly compensated" within the meaning of Section
414(q) of the Code and employees who are five percent or more stockholders
of the Company or any subsidiary of the Company will not be eligible to
participate.
- -8-
Pursuant to the 2002 Employee Stock Purchase Plan, each eligible employee
will be permitted to purchase shares of the Common Stock through regular
payroll deductions (and/or cash payments) in an amount equal to 10% of the
employee's base pay (as elected by the employee) for each payroll period.
Participating employees will be able to purchase shares of Common Stock
with such accumulated payroll deductions (and/or cash payments) at the end
of a semi-annual cycle at a purchase price equal to the lesser of: (i)
85 percent of the fair market value of the Common Stock on the date the
semi-annual cycle begins or (ii) 85 percent of the fair market value of
Common Stock on the date the semi-annual cycle ends. Under the 2002 Employee
Stock Purchase Plan, the fair market value of the shares of the Common Stock
which may be purchased by any employee during any calendar year may not
exceed $25,000.
PURPOSE
The purpose of the 2002 Employee Stock Purchase Plan is to align employee
and shareholder long-term interests by facilitating the purchase of Common
Stock by employees and to enable employees to develop and maintain significant
ownership of Common Stock. An additional purpose of the 2002 Employee Stock
Purchase Plan is to comply with the requirements of Section 423 of the Code,
and thus to obtain for the participants the tax advantages
provided thereby (described below in the section entitled "Certain Federal
Income Tax Consequences").
ADMINISTRATION
The 2002 Employee Stock Purchase Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan.
PARTICIPATION
Subject to certain procedural requirements, all employees of the Company
who have at least one year of service and work more than 30 hours per week
will be eligible to participate in the 2002 Employee Stock Purchase Plan,
except that employees who are "highly compensated" within the meaning of
Section 414(q) of the Code and employees who are five percent or more
stockholders of the Company or any subsidiary of the Company will not be
eligible to participate. Designations of corporations participating in
the 2002 Employee Stock Purchase Plan may be made from time to time by
the Compensation Committee from among the subsidiary corporations of the
Company, including corporations which become subsidiaries after the
adoption and approval of the 2002 Employee Stock Purchase Plan.
PURCHASE OF SHARES
Pursuant to the 2002 Employee Stock Purchase Plan, each eligible employee
will be permitted to purchase shares of the Common Stock through regular
payroll deductions (and/or cash payments) in an aggregate amount equal to
up to 10% of the employee's base pay (as elected by the employee) for
each payroll period. Under the 2002 Employee Stock Purchase Plan, the
fair market value of the shares of Common Stock which may be purchased by
any employee during any calendar year may not exceed $25,000.
- -9-
STOCK PURCHASE PRICE
Participating employees will be able to purchase shares of Common Stock
with payroll deductions (and/or cash payments) at the end of a semi-annual
cycle at a purchase price equal to the lesser of: (i) 85 percent of the
fair market value of Common Stock on the date the semi-annual cycle begins
or (ii) 85 percent of the fair market value of Common Stock on the date
the semi-annual cycle ends.
NONTRANSFERABLE RIGHT TO PURCHASE
A right to purchase shares of Common Stock which is granted to a participant
under the 2002 Employee Stock Purchase Plan is not transferable otherwise
than by will or the laws of descent and distribution, and is exercisable,
during the participant's lifetime, only by the participant.
TERM
No right to purchase shares may be granted under the 2002 Employee Stock
Purchase Plan with respect to any fiscal year after fiscal 2012. Rights to
purchase shares which are granted before or during fiscal 2012, however, may
extend beyond the end of fiscal 2012, and the provisions of the 2002
Employee Stock Purchase Plan will continue to apply thereto.
AMENDMENTS TO OR DISCONTINUANCE OF THE 2002 EMPLOYEE STOCK PURCHASE PLAN
The Board may from time to time amend or terminate the 2002 Employee Stock
Purchase Plan; provided, however, that (i) no such amendment or termination
may adversely affect the rights of any participant without the consent of
such participant and (ii) to the extent required by Section 423 of the
Code or any other law, regulation or stock exchange rule, no such amendment
shall be effective without the approval of stockholders entitled to vote
thereon. Additionally, the Board may make such amendments as it deems
necessary to comply with applicable laws,rules and regulations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES
UNDER THE 2002 EMPLOYEE STOCK PURCHASE PLAN. THIS SUMMARY DOES NOT PURPORT
TO BE COMPLETE AND DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO
TAXPAYERS WITH SPECIAL TAX STATUS. IN ADDITION, THIS SUMMARY DOES NOT
DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE, AND DOES NOT DISCUSS
ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER THAN INCOME TAX CONSEQUENCES.
THE COMPANY ADVISES EACH PARTICIPANT TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN THE 2002 OPTION PLAN
AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
The 2002 Employee Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" as defined in Section 423 of the Code.
Assuming such qualification, a participant will not recognize any taxable
income as a result of participating in the 2002 Employee Stock Purchase Plan,
exercising options granted pursuant to the 2002 Employee Stock Purchase Plan
or receiving shares of Common Stock purchased pursuant to such options. A
participant may, however, be required to recognize taxable income as
described below.
If a participant disposes of any share of Common Stock purchased pursuant to
the 2002 Employee Stock Purchase Plan after the later to occur of (i) two years
from the grant date for the related option and (ii) one year after the exercise
date for the related option (such disposition, a "Qualifying Transfer"), or
if he or she dies (whenever occurring) while owning any share purchased under
the 2002 Employee Stock Purchase Plan, the participant generally will
recognize compensation income, for the taxable year in which such disposition
or death occurs, in an amount equal to the lesser of (i) the excess of the
market value of the disposed share at the time of such disposition over its
purchase price, and (ii) 15% of the market value of the disposed share on the
grant date for the option to which such disposed share relates. In the case of
a Qualifying Transfer, (a) the basis of the disposed share will be increased
by an amount equal to the amount of compensation income so recognized, and
(b) the participant will recognize a capital gain or loss, as the case may be,
equal to the difference between the amount realized from the disposition of
the shares and the basis for such shares.
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If the participant disposes of any share other than by a Qualifying
Transfer, the participant generally will recognize compensation income in
an amount equal to the excess of the market value of the disposed share on the
date of disposition over its purchase price. In such event, the Company will
be entitled to a tax deduction equal to the amount of compensation income
recognized by the participant. Otherwise, the Company will not be entitled to
any tax deduction with respect to the grant or exercise of options under the
2002 Employee Stock Purchase Plan or the subsequent sale by participants of
shares purchased pursuant to the 2002 Employee Stock Purchase Plan. A transfer
by the estate of the participant of shares purchased by the participant under
the 2002 Employee Stock Purchase Plan has the same federal income tax effects
on the Company as a Qualifying Transfer.
ADDITIONAL INFORMATION
The Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 2001 and quarterly report on Form 10-QSB for the quarter ended
June 30, 2002 are being delivered to you with this Information Statement.
The Company will furnish a copy of any exhibit thereto or other information
upon request by a stockholder to the Company's principal offices at
Science Dynamics Corporation, 2059 Springdale Road, Suite 100,
Cherry Hill, New Jersey 08003;
Attention: Alan C. Bashforth, Secretary. (856) 424-0068.
By Order of the Board of Directors,
/s/ Alan C. Bashforth
Alan C. Bashforth
Chief Executive Officer
Cherry Hill, New Jersey
November 12, 2002
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EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
SCIENCE DYNAMICS CORPORATION
The undersigned, being the President and Secretary of SCIENCE DYNAMICS
CORPORATION a corporation existing under the laws of the State of Delaware,
does hereby certify under the seal of the said corporation as follows:
1. The name of the Corporation (hereinafter referred to as the
"Corporation") is Science Dynamics Corporation. The date of filing the
original Certificate of Incorporation with the Secretary of State of
Delaware was May 24, 1973. The date of the filing of the First
Certificate of Amendment to the Certificate of Incorporation with the
Secretary of the State of Delaware was October 31, 1980. The date of
the filing of the Second Certificate of Amendment to the Certificate of
Incorporation with the Secretary of the State of Delaware was
November 25, 1995. The date of the filing of the Third Certificate of
Amendment to the Certificate of Incorporation with the Secretary of the
State of Delaware was May 23, 1984. The date of the filing of the Fourth
Certificate of Amendment to the Certificate of Incorporation with the
Secretary of the State of Delaware was July 13, 1987. The date of the
filing of the Fifth Certificate of Amendment to the Certificate of
Incorporation with the Secretary of the State of Delaware was November 8, 1996.
The date of the filing of the Sixth Certificate of Amendment to the
Certificate of Incorporation with the Secretary of the State of Delaware
was December 15, 1998.
2. The certificate of incorporation of the Corporation is hereby amended
by replacing Article Fourth, in its entirety, with the following:
"FOURTH: The Corporation is authorized to issue two classes of stock. One
class of stock shall be Common Stock, par value $0.01. The second class of
stock shall be Preferred Stock, par value $0.01. The Preferred Stock, or
any series thereof, shall have such designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as shall be expressed in the resolution
or resolutions providing for the issue of such stock adopted by the Board of
Directors and may be made dependent upon facts ascertainable outside such
resolution or resolutions of the Board of Directors, provided that the matter
in which such facts shall operate upon such designations, preferences, rights
and qualifications; limitations or restrictions of such class or series of
stock is clearly and expressly set forth in the resolution or resolutions
providing for the issuance of such stock by the Board of Directors.
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The total number of shares of stock of each class which the Corporation
shall have authority to issue and the par value of each share of each class
of stock are as follows:
Class Par Value Authorized Shares
----- --------- -----------------
Common $0.01 200,000,000
Preferred $0.01 10,000,000
Totals: 210,000,000
3. The amendment of the certificate of incorporation herein certified has
been duly adopted by the unanimous written consent of the Corporation's
Board of Directors and a majority of the Corporation's stockholders in
accordance with the provisions of Sections 141(f), 228 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Corporation's
Certificate of Incorporation, as amended, to be signed by Alan C. Bashforth,
its President and Secretary, this ___ day of December, 2002.
SCIENCE DYNAMICS CORPORATION
By:_______________________________
Alan C. Bashforth, President and Secretary
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