FORBEARANCE AGREEMENT





      This Forbearance Agreement (this "AGREEMENT") is entered into as of July

21, 2006, by and between SCIENCE DYNAMICS CORPORATION, a Delaware corporation

(the "COMPANY"), and LAURUS MASTER FUND, LTD., a Cayman Islands company (the

"PURCHASER"), with reference to the following facts:



      A.    The Company and the Purchaser are parties to, among others, the

following documents:



            1.    Securities Purchase Agreement dated February 11, 2005 (the

                  "PURCHASE AGREEMENT");

            2.    Secured Term Note dated February 11, 2005, in the principal

                  amount of $2,000,000, executed by the Company in favor of the

                  Purchaser (the "TERM NOTE");

            3.    Common Stock Purchase Warrant dated February 11, 2005, for the

                  purchase of up to 6,000,000 shares of Common Stock of the

                  Company, executed by the Company in favor of the Purchaser

                  (the "INITIAL WARRANt");

            4.    Registration Rights Agreement dated February 11, 2005 (the

                  "REGISTRATION RIGHTS AGREEMENT");

            5.    Master Security Agreement dated February 11, 2005 (the

                  "SECURITY AGREEMENT");

            6.    Stock Pledge Agreement dated February 11, 2005 (the "STOCK

                  PLEDGE AGREEMENT");

            7.    Subsidiary Guaranty dated February 11, 2005 (the

                  "GUARANTIES");

            8.    Joinder Agreement dated February 23, 2005 executed by Systems

                  Management Engineering, Inc., a Virginia corporation and

                  majority owned subsidiary of the Company, and the Purchaser;

            9.    Amendment and Waiver dated November 18, 2005;

            10.   Common Stock Purchase Warrant dated November 18, 2005, for the

                  purchase of up to 3,000,000 shares of Common Stock of the

                  Company, executed by the Company in favor of the Purchaser

                  (the "ADDITIONAL WARRANT"); and

            11.   Default Waiver Agreement dated May 16, 2006 and effective May

                  4, 2006.



The above-referenced documents and all other documents executed in connection

therewith between the Company and the Purchaser are hereinafter collectively

referred to as the "OPERATIVE DOCUMENTS."



      B. Certain Events of Default (the "EXISTING DEFAULTS") may have occurred

and are continuing under the Operative Documents by virtue of, among other

things: (1) the Company's failure to pay accrued interest and principal on the

Term Note when due; and (2) the Company's failure to comply with certain

registration requirements of the Registration Rights Agreement. The Existing

Defaults entitle the Purchaser to immediately enforce all the rights and

remedies set forth in the Operative Documents, including, but not limited to,

the right of the Purchaser to exercise its rights with respect to the Collateral

pursuant to the Security Agreement and the right of the Purchaser to exercise

its rights with respect to the Collateral pursuant to the Stock Pledge

Agreement.



                                        1

{PAGE}



      C. The Purchaser acknowledges that the Company has encountered operational

difficulties and needs to attract additional financing. In order to attract such

financing the Company has requested that the Purchaser waive the Existing

Defaults and forbear from exercising its remedies under the Operative Documents

and to amend as set forth herein certain provisions of the Operative Documents,

and the Purchaser has agreed to do so on the terms set forth herein.



NOW, THEREFORE, for good and valuable consideration, the parties agree as

follows:



1.    Defined Terms. Capitalized terms not otherwise defined herein shall

have the same meanings as set forth in the Operative Documents.



2.    Acknowledgment of Liability. The Company acknowledges that pursuant to

the Stock Pledge Agreement and the Security Agreement, the Purchaser has a

valid, first priority security interest in the Pledged Stock and all of the

assets of the Company and its Subsidiaries and that the Existing Defaults are

existing and uncured Events of Default under the Operative Documents, which are

continuing to the date of this Agreement.



3.    Forbearance. The Company acknowledges the Existing Defaults are

existing and uncured Events of Default under the Operative Documents, which are

continuing as of the date of this Agreement. The Company further acknowledges

and agrees that the Purchaser is not in any way agreeing to waive such Existing

Defaults as a result of this Agreement or the performance by the parties of

their respective obligations hereunder or thereunder except as expressly set

forth herein and the Purchaser expressly reserves its rights and remedies in

regards thereof except as expressly set forth herein. Subject to the conditions

contained herein and performance by the Company of all of the terms of this

Agreement, the Purchaser shall waive the Existing Defaults identified in Recital

B above and agrees to forbear from enforcing the remedies set forth in clauses

(i) through (vi) below, and shall forbear from exercising the following remedies

it has as a result of the occurrence of the Existing Defaults through the date

of this Agreement (the "FORBEARANCE PERIOD"): (i) enforcing the Default Payment

pursuant to Article IV of the Term Note, (ii) acceleration of the principal,

interest and other fees that remain unpaid pursuant to Article IV of the Term

Note, (iii) enforcement of the Guaranties, (iv) enforcement of all accrued and

unpaid liquidated damages pursuant to Section 2(b) of the Registration Rights

Agreement, (v) enforcement of the default provisions set forth in Section 5 of

the Security Agreement, and (vi) enforcement of the default provisions set forth

in Sections 3, 5(c), 6, 7 and 14 of the Stock Pledge Agreement. It is expressly

agreed and understood by the parties hereto that in the event that the Company

fails to repay (x) at least $250,000 of the Principal Amount of the Term Note to

the Purchaser (through cash payment of immediately available funds only), not

including the payment required to be made as of the date hereof, on or prior to

August 1, 2006 (the "AUGUST REPAYMENT") or (y) at least $2,000,000 of the

Principal Amount of the Term Note (through conversion or cash payment of

immediately available funds only) to the Purchaser on or before August 31, 2006,

an Event of Default shall immediately arise upon the occurrence of either such

repayment failure. Additionally, this forbearance shall not be construed as an

agreement by the Purchaser to forbear from exercising any of its rights or

remedies under the Operative Documents with respect to any further Events of

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