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<DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>UNITED
STATES</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>SECURITIES
AND EXCHANGE COMMISSION</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>WASHINGTON,
D.C. </STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>20549</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>___________________________</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>FORM
8-K</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>CURRENT
REPORT</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Pursuant
to Section 13 or 15(d) of the</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Securities
Exchange Act of 1934</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>April
26, 2005</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date of
Report (Date of earliest event reported)</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 23pt; FONT-FAMILY: Times New Roman"><STRONG>Millennium
Cell Inc.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
name of Registrant as specified in its charter)</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="100%">
  <TR>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Delaware</STRONG></FONT></DIV></TD>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>000-31083</STRONG></FONT></DIV></TD>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>22-3726792</STRONG></FONT></DIV></TD></TR>
  <TR>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
      or other jurisdiction</FONT></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
      incorporation)</FONT></DIV></TD>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
      File Number)</FONT></DIV></TD>
    <TD vAlign=top align=middle width="26%">
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
      Employer</FONT></DIV>
      <DIV
      style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
      align=center><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
      Number)</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>1
Industrial Way West</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Eatontown,
New Jersey 07724</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
of principal executive offices)</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>(732)
542-4000</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant's
telephone number, including area code)</FONT><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center>
<DIV>
<DIV>
<HR align=left width="100%" color=#000000 noShade SIZE=1>
</DIV><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Former
name or former address, if changed since last report)</FONT></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
]</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
]</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
]</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[
]</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><BR></DIV><BR>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV><BR>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Item
1.01.</STRONG></FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG><U>Entry
into a Material Agreement</U></STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On April
25, 2005 (the &#8220;Closing Date&#8221;), Millennium Cell Inc., a Delaware corporation (the
&#8220;Company&#8221;), consummated a $10.0&nbsp;million private placement (the &#8220;Offering&#8221;)
of its Series C Convertible Preferred Stock, par value $.001 per share (the
&#8220;Series C Preferred&#8221;) with certain institutional accredited investors (the
&#8220;Buyers&#8221;). </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Offering is embodied in a Securities Purchase Agreement dated as of
April&nbsp;20, 2005 among the Company and such Buyers, the Registration Rights
Agreement dated as of April 20, 2005 among the Company and the Buyers, and the
other agreements executed and delivered on the Closing Date in connection with
the Securities Purchase Agreement (collectively with the Securities Purchase
Agreement and the Registration Rights Agreement, the &#8220;Transaction Documents&#8221;),
which material Transaction Documents are filed herewith. The descriptions in
this Current Report on Form 8-K of the Transaction Documents do not purport to
be complete and are qualified in their entirety by reference to the agreements
and instruments attached hereto as exhibits. A copy of the press release
announcing the consummation of the Offering is also attached
hereto.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company anticipates using the net proceeds from the Offering for working capital
and general corporate purposes. H.C. Wainwright &amp; Co., Inc. served as
placement agent for the Offering, for which H.C. Wainwright &amp; Co., Inc.
shall be entitled to receive a cash fee and warrants to purchase a number of
shares of Common Stock, as determined in accordance with the terms of the
placement agent agreement between the Company and H.C. Wainright &amp; Co.,
Inc.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Securities
Purchase Agreement</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the Securities Purchase Agreement, on the Closing Date, the Company issued to
the Buyers, in consideration of its receipt of $10.0 million in cash at closing,
an aggregate of 10,000 shares of the Series&nbsp;C Preferred and warrants (the
&#8220;Warrants&#8221;) to purchase a number of shares of the Company&#8217;s common stock, par
value $.001 per share (&#8220;Common Stock&#8221;), equal to 25% of the number of shares of
Common Stock into which the shares of Series&nbsp;C Preferred are convertible on
the Closing Date. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
addition, the Company agreed that, other than for the securities which shall be
issued or issuable to The Dow Chemical Company (&#8220;Dow&#8221;) pursuant to the Stock
Purchase Agreement dated as of February 27, 2005 between the Company and Dow
(the terms of which are described in the Company&#8217;s Current Report on Form 8-K
dated February 28, 2005, to which such agreement is attached as an exhibit),
from the Closing Date until the date that is 30 trading days following the date
that the shelf registration statement of the Company (the &#8220;Registration
Statement&#8221;) filed under the Securities Act of 1933, as amended (the &#8220;Securities
Act&#8221;) covering the Registrable Securities (as defined below), is declared
effective (the &#8220;Registration Effective Date&#8221;) by the Securities and Exchange
Commission (&#8220;SEC&#8221;), the Company will not, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of any of its or its
subsidiaries&#8217; equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is
convertible into or exchangeable or exercisable for shares of Common Stock or
other securities which are convertible into or exchangeable or exercisable for
shares of Common Stock, but excluding Excluded Securities (as defined
below).</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Moreover,
from the last day of the 30 trading day period described in the preceding
paragraph until the second anniversary of the Closing Date, the Company will
not, directly or indirectly, effect any sale, grant of any option to purchase,
or other disposition of any of its or its subsidiaries&#8217; equity or equity
equivalent securities (other than Excluded Securities) without first providing
written notice to each Buyer of any proposed or intended issuance or sale or
exchange of securities being offered by the Company, which notice shall
constitute an offer by the Company to issue and sell to the Buyers an aggregate
amount equal to 30% of such offered securities on terms that are at least as
favorable to the Company as those set forth in such offer notice and in
accordance with the procedures provided in the Securities Purchase
Agreement.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company&#8217;s Certificate of Incorporation currently authorizes it to issue up to
70,000,000 shares of Common Stock. The Company has agreed to hold a meeting of
its stockholders not later than April 30, 2006 to seek its stockholders&#8217;
approval of, among other things, (i)&nbsp;the Company&#8217;s issuance of the Series C
Preferred and the Warrants to the Buyers, and the Common Stock issuable upon the
conversion of the Series C Preferred, upon the exercise of the Warrants, and as
dividends in respect to the Series C Preferred in accordance with applicable law
and the rules and regulations of the Nasdaq SmallCap Market, or if the Common
Stock is no longer listed on the Nasdaq SmallCap Market, then the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market (any such market on
which the Common Stock is listed on any date of determination shall be
hereinafter referred to as the &#8220;Principal Market&#8221;), and (ii)&nbsp;an amendment
to its Certificate of Incorporation to authorize the increase of the number of
authorized shares of the Company&#8217;s Common Stock. In the event that the Company&#8217;s
stockholders do not approve the matters described in the preceding sentence at
or prior to the 2006 annual meeting of the Company&#8217;s stockholders or at
subsequent meetings called for that purpose, the Company is required to redeem
the outstanding shares of Series&nbsp;C Preferred at the Redemption Price (as
defined in the Series C Certificate of Designations).</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Securities Purchase Agreement contains representations and warranties by the
Company concerning, among other things, its equity capitalization, business and
properties (which representations and warranties survive termination of the
Securities Purchase Agreement). The Company agrees to indemnify the Buyers for,
among other things, breaches of the Company&#8217;s representations, warranties and
covenants under the Securities Purchase Agreement, and certain third party
actions. The Company&#8217;s indemnification obligations are not subject to any
maximum dollar limitation.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Description
of Series C Preferred Stock</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The terms
of the Series C Preferred are set forth in the Certificate of Designations
thereof. Each share of Series C Preferred will bear a cumulative dividend equal
to 7% per annum of its original purchase price. Dividends will accrue daily from
the Closing Date, and will be payable quarterly in shares of Common Stock
(provided that at such time the Company is in compliance with certain conditions
related to its securities (&#8220;Equity Conditions&#8221;)) or, at the option of the
Company, in cash. Dividends paid in shares of Common Stock shall be paid in a
number of shares equal to the quotient of (i) the amount of such dividend
payment divided by (ii)&nbsp;95% of the arithmetic average of the dollar
volume-weighted average price for the Common Stock on the Principal Market
(&#8220;Weighted Average Price&#8221;) on each of the five consecutive trading days
immediately preceding (but not including) the relevant dividend
date.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
event of (i)&nbsp;the liquidation, dissolution or winding up of the Company or
such subsidiaries of the Company the assets of which constitute all or
substantially all the assets of the business of the Company and its subsidiaries
taken as a whole, in a single transaction or series of related transactions (a
&#8220;Liquidation&#8221;), or (ii)&nbsp;a change of control of the Company (any event
described in clauses (i) and (ii) is referred to as a &#8220;Liquidation Event&#8221;), each
holder of Series C Preferred then outstanding shall be entitled to receive in
cash out of the assets of the Company available for distribution to its
stockholders, after all amounts which are payable to the holders of Series A
Preferred Stock, par value $.001 per share (&#8220;Series A Preferred&#8221;) and Series B
Preferred Stock, par value $.001 per share (&#8220;Series B Preferred&#8221;) have been
paid, and before any amounts which are payable to the holders of any of the
capital stock of the Company of any class junior in rank to the Series&nbsp;C
Preferred in respect of liquidation preferences have been paid, an amount per
share of Series&nbsp;C Preferred equal to (x)&nbsp;if such Liquidation Event is
a Liquidation, the original purchase price for such share plus 120% of all
accrued but unpaid dividends on such share, and (y)&nbsp;if such Liquidation
Event is a change of control of the Company, 120% of the sum of the original
purchase price for such share plus all accrued but unpaid dividends on such
share.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
holder of Series C Preferred may convert any whole number thereof into shares of
Common Stock at a conversion rate per share of Series C Preferred (the
&#8220;Conversion Rate&#8221;) equal to the quotient of (i)&nbsp;the original purchase price
for such share divided by (ii)&nbsp;a conversion price (the &#8220;Conversion Price&#8221;)
which is the lesser of (x) $2.00 (subject to adjustment as described herein and
as provided in the terms of the Series C Preferred, the &#8220;Standard Conversion
Price&#8221;) and (y)&nbsp;the Interim Conversion Price (as defined below). Such
Conversion Price and all price determinations in respect of the Series C
Preferred will be appropriately adjusted to reflect any stock split, stock
dividend, stock combination or other similar transaction that occurs during any
applicable period.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;Interim
Conversion Price&#8221; means the arithmetic average of the Weighted Average Price of
the Common Stock for each of the 10 consecutive trading days ending on the
trading day immediately preceding the date of the applicable conversion notice;
provided, that unless consented to by the Company and holders of </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
majority of the outstanding </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series C
Preferred, the Interim Conversion Price shall not be less than $1.00 prior to
the six month anniversary of the Closing Date (the &#8220;Interim Conversion Price
Limitation&#8221;). No holder of Series C Preferred may elect to use the Interim
Conversion Price in a conversion notice (the restrictions set forth below in
clauses (I), (II)(A), II(B) and (II)(C) of this paragraph shall be hereinafter
referred to collectively as the &#8220;Total Interim Limitations&#8221;): </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(I)
during any period in which the Company has notified the holders of Series C
Preferred that such holders will be unable to elect in any conversion notice to
use the Interim Conversion Price (which suspension right is subject to certain
restrictions relating to frequency, duration and timing); or </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(II) to
convert more than (A)&nbsp;during any 20 consecutive trading day period, 15% of
the number of shares of Series&nbsp;C Preferred issued to such holder on the
Closing Date, (B) during the first nine months following the Closing Date or
during any calendar quarter, 30% of the number of shares of Series&nbsp;C
Preferred issued to such holder on the Closing Date (the &#8220;30% Interim Conversion
Restriction&#8221;) and (C) during any six month period, 35% of the number of shares
of Series&nbsp;C Preferred issued to such holder on the Closing Date at an
average Interim Conversion Price less than $1.25 (the Interim Conversion Price
Limitation and the restriction in clause (II)(C) hereof, collectively, the
"Interim Conversion Restrictions");</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>provided</U></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> that
(x)&nbsp;after the occurrence of a Triggering Event (as defined below) and until
such Triggering Event is cured, each holder of Series C Preferred shall have the
right to convert all or a portion of such holder's shares of Series C Preferred
without being subject to the Interim Conversion Restrictions, and (y)&nbsp;each
holder of Series C Preferred shall be entitled to convert its pro rata portion
(based on the number of shares of Series&nbsp;C Preferred purchased by such
holder on the Closing Date) of 2,000 shares of Series C Preferred without being
subject to the Interim Conversion Price Limitation or the Total Interim
Limitations.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;Triggering
Event&#8221; means any of the following events:</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 99pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      failure of the Registration Statement to be declared effective by the SEC
      on or prior to the date that is 270 days after the Closing
      Date;</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 99pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">while
      the Registration Statement is required to be maintained effective pursuant
      to the terms of the Registration Rights Agreement, the effectiveness of
      the Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to the holders
      of Series C Preferred for sale of all of the Registrable Securities in
      accordance with the terms of the Registration Rights Agreement, and such
      lapse or unavailability continues for a period of 10 consecutive trading
      days (excluding days during any allowable grace period (&#8220;Grace Period&#8221;)
      during which the Company may delay the disclosure of material, non-public
      information concerning the Company, the disclosure of which at the time is
      not, in the good faith opinion of the Board of Directors of the Company
      and its counsel, in the best interest of the Company and, in the opinion
      of counsel to the Company, otherwise required) and such holder&#8217;s
      Registrable Securities covered by such Registration Statement cannot be
      sold without restriction pursuant to Rule 144(k) promulgated under the
      Securities Act;</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 99pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      suspension from trading or failure of the Common Stock to be listed on the
      Principal Market for a period of 10 consecutive trading days or for more
      than an aggregate of 15 trading days in any 365-day period;
    or</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV>
<TABLE id=list cellSpacing=0 cellPadding=0 width="100%">
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 99pt" align=right><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&nbsp;&nbsp;</FONT></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"
      align=justify><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Company breaches in any material respect any representation, warranty,
      covenant or other term or condition of any Transaction Document, except,
      in the case of a breach of a covenant which is curable, only if such
      breach remains uncured for a period of at least five business
      days.</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any right
of the Company under the Series C Certificate of Designations to require the
conversion or redemption of shares of Series C Preferred shall be subject to the
satisfaction or waiver in writing by the applicable holder against whom the
Company shall exercise any such right, of the Equity Conditions from the date of
the relevant notice from the Company until the date of such conversion or
redemption. If at any time the Weighted Average Price of the Common Stock
exceeds 200% of the Standard Conversion Price on each of the 20 consecutive
trading days immediately preceding the date of determination, the Company has
the right on such date to require (upon written notice to the Buyers) that some
or all of the outstanding Series C Preferred be converted into shares of Common
Stock at the applicable conversion rate; provided that the Company may not
deliver notice of any such election within 30 trading days of any previous
notice of election.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If,
during the period commencing on the one month anniversary of the Registration
Effective Date through the date that is the later of (i) the first anniversary
of the Registration Effective Date and (ii)&nbsp;such time as a Buyer or its
transferee(s) holds less than 75% of the number of shares of Series C Preferred
issued to such Buyer on the Closing Date (the &#8220;Second Interim Conversion
Election Date&#8221;), (x) the closing sale price of the Common Stock immediately
preceding delivery by the Company of the applicable conversion election notice
under this provision of the terms of the Series C Preferred (the &#8220;Company
Interim Conversion Election Notice&#8221;) shall be at least 120% of the Conversion
Price and (y) the number of shares of Common Stock traded on the trading day
immediately preceding delivery of the applicable Company Interim Conversion
Election Notice is at least eight times the aggregate number of shares set forth
in the applicable Company Interim Conversion Election Notice, then the Company
may require that up to 10% of the number of Series C Preferred issued to each
Buyer on the Closing Date be converted into shares of Common Stock at the
applicable Conversion Rate, subject to certain conditions and limitations
relating to frequency and timing of any Company Interim Conversion Election
Notice. The Company may lower the Conversion Price in a Company Interim
Conversion Election Notice in order to use the Company interim conversion option
described in this paragraph.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If, from
and after the Second Interim Conversion Election Date, (i) the closing sale
price of the Common Stock immediately preceding delivery by the Company of the
applicable Company Interim Conversion Election Notice shall be at least (A) if
the applicable Conversion Price is $1.25 or less, 114% of the applicable
Conversion Price and (B) if the applicable Conversion Price is greater than
$1.25, 108% of the applicable Conversion Price and (ii) the number of shares of
Common Stock traded on the trading day immediately preceding delivery of the
applicable Company Interim Conversion Election Notice is at least five times the
aggregate number of shares set forth in the applicable Company Interim
Conversion Election Notice, then the Company may require that up to 10% of the
number of Series C Preferred issued to each Buyer on the Closing Date be
converted into shares of Common Stock at the applicable Conversion Rate, subject
to certain conditions and limitations relating to frequency and timing of any
Company Interim Conversion Election Notice. The Company may lower the Conversion
Price in a Company Interim Conversion Election Notice in order to use the
Company interim conversion option described in this paragraph.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From and
after the date that is the 18 month anniversary of the Closing Date, the Company
may elect, upon 15 trading days&#8217; prior written notice (each, an &#8220;Installment
Notice&#8221;) to the holders of Series C Preferred, to convert or redeem 500 shares
of Series C Preferred pro rata from the holders of the Series C Preferred (based
on the number of shares of Series C Preferred then held by each such holder
compared to the total number of outstanding shares of Series C Preferred then
outstanding); provided that each Installment Notice shall be at least
25&nbsp;trading days from the date of any prior Installment Notice. If the
Company elects in its Installment Notice to redeem such shares of Series C
Preferred, the applicable redemption amount per shares will be an amount in cash
equal to the original purchase price paid by such holder for such share on the
Closing Date. If the Company elects in its Installment Notice to convert such
shares of Series C Preferred, then such shares will be converted at a conversion
rate based on a price which shall be computed as 95% of the arithmetic average
of the Weighted Average Price of the Company Common Stock on each of the 10
consecutive trading days immediately preceding the applicable installment
conversion date.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If any
shares of Series C Preferred remains outstanding on April 25, 2008, the Company
shall redeem each such share for an amount in cash equal to the original
purchase price therefor plus any accrued but unpaid dividends in respect of each
such share of Series C Preferred.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Conversion Price will be subject to adjustment in the event of stock dividends
and splits, combinations, mergers, consolidations, and other similar events. A
&#8220;weighted average&#8221; antidilution adjustment will be made to the Standard
Conversion Price upon any issuance by the Company of Common Stock (or securities
convertible into or exercisable for shares of Common Stock) at a consideration
per share less than the Standard Conversion Price then in effect immediately
prior to such time, with the following issuances being excluded from such
adjustment (collectively, &#8220;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Excluded
Securities</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;):</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
connection with an any employee benefit plan which has been approved by the
Board of Directors of the Company, pursuant to which the Company's securities
may be issued to any employee, officer, consultant or director for services
provided to the Company;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">upon the
issuance or upon conversion of the Series A Preferred or Series B Preferred or
upon the issuance or exercise of warrants to purchase Common Stock which shall
be issued by the Company contemporaneously with any issuances of Series B
Preferred; provided that such issuance of shares upon issuance, conversion or
exercise, as applicable, is made pursuant to the terms of the Certificate of
Designations for such Series A Preferred, the Certificate of Designations for
such Series B Preferred and the warrants in the form attached to the Dow
Purchase Agreement and such preferred stock or warrants are not amended in any
respect material to the holders of Series C Preferred after the Closing Date;
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">upon
issuance of the shares of Series C Preferred or the Common Stock issuable upon
conversion of the Series C Preferred or issued as dividends in respect thereof
or upon exercise of the Warrants;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued
upon exercise of any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities (as defined below) or any stock or
securities (other than such rights, warrants or options) directly or indirectly
convertible into or exchangeable or exercisable for Common Stock (&#8220;Convertible
Securities&#8221;) which are outstanding on the date immediately preceding the
execution date of the Securities Purchase Agreement, provided that such issuance
of shares of Common Stock upon exercise of such rights, warrants, options or
Convertible Securities is made pursuant to the terms of such rights, warrants,
options or Convertible Securities in effect on the date immediately preceding
the execution date of the Securities Purchase Agreement and such rights,
warrants, options or Convertible Securities are not amended after the date
immediately preceding such date; </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued
for consideration other than cash pursuant to a merger, consolidation,
acquisition or similar business combination the primary purpose of which is not
to raise equity capital;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued in
connection with any stock split, stock dividend, recapitalization or similar
transaction by the Company for which adjustment is made pursuant to the terms of
the Series C Preferred;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(g)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued as
consideration, whether in whole or in part, to any person or entity for
providing services or supplying goods to the Company; </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(h)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued to
any entity which is or will be, itself or through its subsidiaries or
affiliates, an operating company in a business related to or complementary with
the business of the Company and in which the Company receives material benefits
in addition to the investment of funds; </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued
pursuant to any equipment leasing arrangement; </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(j)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">issued to
pay all or a portion of any investment banking, finders or similar fee or
commission, which entitles the holders thereof to acquire shares of Common Stock
at a price not less than the market price of the Common Stock on the date of
such issuance and which is not subject to any adjustments other than on account
of stock splits and reverse stock splits; and </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(k)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 9pt">&nbsp;&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as may be
mutually agreed in writing prior to their issuance by the Company and holders of
a majority of the outstanding Series C Preferred.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If any of
the following shall occur (each, a &#8220;Redemption Event&#8221;):</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(A)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
holder&#8217;s pro rata portion of the number of shares of Common Stock reserved for
conversions of the Series C Preferred is less than the number of shares of
Common Stock that such holder would be entitled to receive upon a conversion of
all of such holder&#8217;s shares of Series C Preferred, and such deficiency continues
for more than 10 business days;</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(B)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
number of shares of Common Stock registered pursuant to the Registration
Statement for any holder of Series C Preferred is less than the number that such
holder would be entitled to receive upon a conversion of all of such holder&#8217;s
shares of Series C Preferred; or </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(C)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
Company fails or is unable to issue or deliver any shares of Common Stock within
10 business days of any conversion or attempted conversion by a holder of shares
of Series C Preferred in accordance with the notice provisions of the terms of
the Series C Preferred,</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">then each
holder of Series C Preferred shall have the right, at such holder's option, to
require the Company to redeem a number of such holder's shares of Series C
Preferred Shares equal to (i) with respect to a Redemption Event described in
clauses (A) and (B) above, the number of underlying shares of Common Stock that
are not authorized or registered, as applicable, and (ii) with respect to a
Redemption Event described in clause (C) above, the </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">number of
underlying shares that the Company fails or is unable to convert</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> in such
conversion. The redemption price per share of Series C Preferred payable shall
be equal to the greater of (x) 120% of the original purchase price of such
shares of Series C Preferred on the Closing Date, and (y) the product of (1) the
conversion rate in effect at such time as such holder delivers a notice of its
option to require redemption to the Company and (B) the closing sale price of
the Common Stock on the trading day immediately preceding such Redemption Event.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Failure
by the Company to comply with certain of its conversion and redemption
obligations under the terms of the Series C Preferred will entitle the holder of
the shares to be converted or redeemed to cash damages and the right to void the
relevant conversion or redemption, as the case may be, and adjust the Standard
Conversion Price with respect to the shares of Series C Preferred that were the
subject of the attempted conversion or redemption.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
shares of Series C Preferred will have its right to vote with the Common Stock
as a single class on an &#8220;as-converted&#8221; basis, except that for so long as at
least 25% of the number of shares of Series C Preferred issued to the Buyers on
the Closing Date are outstanding, the Company is prohibited from taking certain
actions that have an adverse effect on the Series&nbsp;C Preferred, without the
consent of the holders of a majority of the outstanding Series C
Preferred.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior to
the second anniversary of the Closing Date, the Company will not, without the
consent of the holders of a majority of the outstanding Series C Preferred,
directly or indirectly, incur or guarantee, assume or suffer to exist any
Indebtedness (as defined in the Series&nbsp;C Certificate of Designations) other
than (i)&nbsp;indebtedness existing as of the execution date of the Securities
Purchase Agreement and (ii)&nbsp;certain indebtedness that may in the future be
owed to Dow. From and after the second anniversary of the Closing Date, and so
long as the Series C Preferred shares are outstanding, the Company will not,
without the consent of the holders of a majority of the outstanding Series C
Preferred, directly or indirectly, redeem, defease, repurchase, repay or make
any payments in respect of, by the payment of cash, all or any portion of any
principal amount of any indebtedness incurred after the second anniversary of
the Closing Date, other than payments in respect of certain indebtedness that
may in the future be owed to Dow.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Description
of Warrants</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the Securities Purchase Agreement, on the Closing Date, the Company issued
Warrants to each Buyer. The Warrants shall be fully vested upon issuance and
shall have a three year term. The Warrants are be exercisable for a number of
shares of Common Stock (&#8220;Warrant Shares&#8221;) equal to 25% of the number of shares
of Common Stock into which the shares of Series&nbsp;C Preferred are convertible
on the Closing Date pursuant to the terms of the Series&nbsp;C Preferred, at a
per share exercise price equal to $2.00, which exercise price is payable in cash
except as set forth below. If a Registration Statement covering Warrant Shares
that are the subject of a holder&#8217;s exercise notice is not then in effect, such
holder may, in its discretion, exercise such holder&#8217;s Warrant in whole or in
part through a cashless exercise in which the holder will be issued a net number
of Warrant Shares based on the relationship of the exercise price to the market
price at the time of exercise. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Warrants will be subject to a six-month holding period from the date of grant.
The exercise price of the warrants will be subject to identical antidilution
protection as the Series C Preferred. See &#8220;Description of Series C Preferred
Stock.&#8221; The shares of Common Stock issuable upon exercise of the Warrants will
be registrable securities under the Registration Rights Agreement.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Registration
Rights Agreement</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT id=TAB1 style="MARGIN-LEFT: 45pt"></FONT><FONT id=TAB1
style="MARGIN-LEFT: 27pt"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On April
20, 2005, the Company and the Buyers entered into a Registration Rights
Agreement. The Registration Rights Agreement provides for the registration for
resale of (i) shares of Common Stock issuable upon conversion of the Series C
Preferred, (ii) the Warrant Shares issued or issuable upon exercise of the
Warrants, (iii) any shares of Common Stock issued or issuable with respect to
dividends payable in respect of the shares of Series&nbsp;C Preferred and (iv)
any shares of Common Stock issued or issuable with respect to any of the
foregoing following a stock split, stock dividend recapitalization, exchange of
similar event (the &#8220;Registrable Securities&#8221;). </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the Registration Rights Agreement, the Company is required to prepare and
file with the SEC, as soon as practicable but in no event later than 30 days
after the Closing Date, a shelf registration statement registering the
Registrable Securities for resale, and to use its best efforts to cause the
registration statement to be declared effective by the SEC as soon as
practicable, but in no event later than 90 days after the Closing Date.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
(i)&nbsp;the Company fails to file the Registration Statement prior to the
filing deadline, (ii) the Company fails to cause the Registration Statement to
be declared effectiveness on or before the 45th day after the effectiveness
deadline or (iii)&nbsp;after the Registration Statement is declared effective by
the SEC, sales of the Registrable Securities included therein cannot be made for
more than five business days pursuant to such Registration Statement (other than
during an allowable Grace Period), the Company will be required to pay to each
holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to 1.0% of the aggregate purchase price of such holder&#8217;s
Registrable Securities for each 30-day period until such failure is cured,
except if such failure is the result of the failure of such holder to provide
the Company with information reasonably requested by the Company and necessary
to complete, amend or supplement the Registration Statement or the result of the
Buyer&#8217;s legal counsel to provide timely comments or objections to the
Registration Statement.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
reasonable expenses, other than underwriting discounts and commissions and as
set forth below, incurred in connection with registrations, filings or
qualifications pursuant to the Registration Rights Agreement shall be paid by
the Company. The Company shall reimburse the holders of Registrable Securities
for the fees and disbursements of legal counsel in connection with registration,
filing or qualification pursuant to the Registration Rights Agreement which
amount shall be limited to $10,000 in the aggregate.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the Registration Rights Agreement, the Company shall indemnify each Buyer
from and against any liabilities arising out of material misstatements or
omissions set forth in the Registration Statement or any prospectus included
therein, subject to standard exceptions.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Security
Agreement; Account Control Agreement</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
payment of dividends with respect to the shares of Series&nbsp;C Preferred and
certain obligations of the Company under the Transaction Documents are secured
by the balance in a cash collateral account established by the Company prior to
the Closing Date. Such security interest is evidenced and effected by
(i)&nbsp;the Account Control Agreement dated as of April&nbsp;25, 2005 among the
Company, Portside Opportunity &amp; Growth Fund, as agent for the Buyers, and
Wachovia Bank, and (ii)&nbsp;the Security Agreement dated as of April&nbsp;25,
2005 between the Company and Portside Opportunity &amp; Growth Fund, as
collateral agent for the Buyers. The Account Control Agreement also provides for
the distribution of the funds in the cash collateral account to either the
Buyers or the Company upon certain circumstances.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><U>Voting
Agreement</U></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In order
to induce the Buyers to enter into the Securities Purchase Agreement, on April
25, 2005, certain stockholders of the Company entered into a Voting Agreement
with the Company whereby each such stockholder agreed that, at any special or
annual meeting of the stockholders of the Company, and in any action by written
consent of the Company&#8217;s stockholders, in each case for the purpose of
considering and approving the Company's issuance of all of the shares of Common
Stock issued and issuable upon conversion of the shares of Series&nbsp;C
Preferred and exercise of the Warrants and as otherwise described in the
Transaction Documents in accordance with applicable law and the rules and
regulations of the Principal Market (the &#8220;Stockholder Approval&#8221;), such
stockholder will vote the Common Stock owned by the Stockholder, any shares of
Common Stock issuable upon the exercise of any options owned by such stockholder
(to the extent any such options have been exercised) and any other securities
held by such stockholder in favor of the Stockholder Approval.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Item
3.02.</STRONG></FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG><U>Unregistered
Sales of Equity Securities</U></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
reported more fully in Item 1.01 above and incorporated herein by reference, in
connection with the consummation of the Offering, the Company issued to the
Buyers 10,000 shares of the Company&#8217;s Series&nbsp;C Preferred, at a purchase
price of $1,000 per share, and Warrants to purchase a number of shares of Common
Stock equal to 25% of the number of shares of Common Stock into which the shares
of Series&nbsp;C Preferred are convertible on the initial issuance date pursuant
to the terms of the Series&nbsp;C Preferred. The terms of the Series C Preferred
and Warrants are summarized herein and are set forth in their entirety in the
Series C Certificate of Designations and form of Warrant attached
hereto.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
private placement of the Series C Preferred and the Warrants was made in
reliance upon the exemption from registration provided for in Section 4(2) of
the Securities Act, and Rule 506 of Regulation D promulgated thereunder. Each
Buyer in the Offering represented to the Company that it is an accredited
investor, as defined by Rule 501 promulgated under the Securities Act, and
certificates representing purchased shares of Series&nbsp;C Preferred and the
Warrants issued in connection with the Offering will contain appropriate legends
to reflect the restrictions on transfer imposed by the Securities
Act.</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Item
5.02.</STRONG></FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG><U>Departure
of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers</U></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>.
</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On April
21, 2005, the Board of Directors of the Company appointed Adam P. Briggs as
President, H. David Ramm as Chief Executive Officer and John D. Giolli as Chief
Financial Officer and Corporate Secretary. The Company issued a press release on
April 22, 2005 to annouce the appointments. A copy of the press release is
attached hereto as Exhibit 99.2 and is incorporated herein by
reference.</FONT></DIV></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Item
9.01.</STRONG></FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG><U>Financial
Statements and Exhibits</U></STRONG></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>.
</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</FONT><FONT
id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits.
</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
      of Certificate of Designations, Preferences and Rights of Series C
      Convertible Preferred Stock</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1.</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
      Purchase Agreement, dated April 20, 2005, among the Company and the
      investors listed on the Schedule of Buyers attached
  thereto</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2.</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
      of Warrant to Purchase Common Stock </FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
      Rights Agreement, dated April 20, 2005, among the Company and the
      investors listed on the Schedule of Buyers attached thereto
    </FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Security
      Agreement, dated as of April 25, 2005 between the Company and Portside
      Opportunity &amp; Growth Fund, as collateral agent for the
      Buyers</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5
      </FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Account
      Control Agreement, dated as of April&nbsp;25, 2005 among the Company,
      Portside Opportunity &amp; Growth Fund, as agent for the Buyers, and
      Wachovia Bank</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.6</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
      of Voting Agreement</FONT></DIV></TD></TR></TABLE></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</FONT></DIV></TD>
    <TD>
      <DIV style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Press
      Release dated April 26, 2005, titled &#8220;Millennium Cell Announces $10
      Million Private Placement Financing&#8221;</FONT></DIV></TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt">&nbsp;</TD>
    <TD>&nbsp;</TD></TR></TABLE></DIV>
<DIV>
<TABLE id=hangingindent cellSpacing=0 cellPadding=0 width="100%" align=center
border=0>
  <TR style="LINE-HEIGHT: 1.25" vAlign=top>
    <TD style="WIDTH: 72pt">&nbsp;</TD>
    <TD style="WIDTH: 36pt"><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.2</FONT></TD>
    <TD><FONT
      style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Press
      release dated April 22, 2005, titled "Millennium Cell Announces Management
      Appointments"&nbsp;</FONT></TD></TR></TABLE></DIV></DIV><BR>
<DIV id=PGBRK style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=FTR>
<DIV id=GLFTR style="WIDTH: 100%" align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV>
<DIV id=PN style="PAGE-BREAK-AFTER: always">
<DIV style="WIDTH: 100%; TEXT-ALIGN: center"><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt" face="Times New Roman"></FONT></DIV>
<DIV style="WIDTH: 100%; TEXT-ALIGN: center">
<HR color=#000000 noShade SIZE=2>
</DIV></DIV>
<DIV id=HDR>
<DIV id=GLHDR style="WIDTH: 100%" align=right><FONT
style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"></FONT></DIV></DIV></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=justify><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=center><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>SIGNATURES</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized. </FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT id=TAB1 style="MARGIN-LEFT: 252pt"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><STRONG>Millennium
Cell Inc.</STRONG></FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>&nbsp;</DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT id=TAB1 style="MARGIN-LEFT: 252pt"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
</FONT><U><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&nbsp;John
D.&nbsp;Giolli</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;</FONT><FONT id=TAB2
style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp; </FONT></U></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT id=TAB1 style="MARGIN-LEFT: 252pt"></FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
John D. Giolli, CPA</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><FONT
id=TAB2 style="LETTER-SPACING: 9pt"><FONT id=TAB2
style="LETTER-SPACING: 9pt"><FONT id=TAB2 style="LETTER-SPACING: 9pt"><FONT
id=TAB2 style="LETTER-SPACING: 9pt"><FONT id=TAB2
style="LETTER-SPACING: 9pt"><FONT id=TAB2
style="LETTER-SPACING: 9pt">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;Title:
Chief Financial Officer </FONT><FONT
style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
Corporate Secretary</FONT></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><BR></DIV>
<DIV
style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"
align=left><FONT
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{"company-data": {"conformed-name": "MILLENNIUM CELL INC", "cik": "0001114872", "assigned-sic": "3690", "irs-number": "223726792", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-31083", "film-number": "05774060"}, "business-address": {"street1": "1 INDUSTRIAL WAY WEST", "city": "EATONTOWN", "state": "NJ", "zip": "07724", "phone": "7325424000"}, "mail-address": {"street1": "INDUSTRIAL WAY WEST", "city": "EATONTOWN", "state": "NJ", "zip": "07724"}}
Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C.
20549
___________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
April
26, 2005
Date of
Report (Date of earliest event reported)
Millennium
Cell Inc.
(Exact
name of Registrant as specified in its charter)
Delaware
000-31083
22-3726792
(State
      or other jurisdiction
of
      incorporation)
(Commission
      File Number)
(IRS
      Employer
Identification
      Number)
1
Industrial Way West
Eatontown,
New Jersey 07724
(Address
of principal executive offices)
(732)
542-4000
(Registrant's
telephone number, including area code)
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[
]
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01.
Entry
into a Material Agreement
On April
25, 2005 (the "Closing Date"), Millennium Cell Inc., a Delaware corporation (the
"Company"), consummated a $10.0 million private placement (the "Offering")
of its Series C Convertible Preferred Stock, par value $.001 per share (the
"Series C Preferred") with certain institutional accredited investors (the
"Buyers").
The
Offering is embodied in a Securities Purchase Agreement dated as of
April 20, 2005 among the Company and such Buyers, the Registration Rights
Agreement dated as of April 20, 2005 among the Company and the Buyers, and the
other agreements executed and delivered on the Closing Date in connection with
the Securities Purchase Agreement (collectively with the Securities Purchase
Agreement and the Registration Rights Agreement, the "Transaction Documents"),
which material Transaction Documents are filed herewith. The descriptions in
this Current Report on Form 8-K of the Transaction Documents do not purport to
be complete and are qualified in their entirety by reference to the agreements
and instruments attached hereto as exhibits. A copy of the press release
announcing the consummation of the Offering is also attached
hereto.
The
Company anticipates using the net proceeds from the Offering for working capital
and general corporate purposes. H.C. Wainwright & Co., Inc. served as
placement agent for the Offering, for which H.C. Wainwright & Co., Inc.
shall be entitled to receive a cash fee and warrants to purchase a number of
shares of Common Stock, as determined in accordance with the terms of the
placement agent agreement between the Company and H.C. Wainright & Co.,
Inc.
Securities
Purchase Agreement
Pursuant
to the Securities Purchase Agreement, on the Closing Date, the Company issued to
the Buyers, in consideration of its receipt of $10.0 million in cash at closing,
an aggregate of 10,000 shares of the Series C Preferred and warrants (the
"Warrants") to purchase a number of shares of the Company's common stock, par
value $.001 per share ("Common Stock"), equal to 25% of the number of shares of
Common Stock into which the shares of Series C Preferred are convertible on
the Closing Date.
In
addition, the Company agreed that, other than for the securities which shall be
issued or issuable to The Dow Chemical Company ("Dow") pursuant to the Stock
Purchase Agreement dated as of February 27, 2005 between the Company and Dow
(the terms of which are described in the Company's Current Report on Form 8-K
dated February 28, 2005, to which such agreement is attached as an exhibit),
from the Closing Date until the date that is 30 trading days following the date
that the shelf registration statement of the Company (the "Registration
Statement") filed under the Securities Act of 1933, as amended (the "Securities
Act") covering the Registrable Securities (as defined below), is declared
effective (the "Registration Effective Date") by the Securities and Exchange
Commission ("SEC"), the Company will not, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of any of its or its
subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is
convertible into or exchangeable or exercisable for shares of Common Stock or
other securities which are convertible into or exchangeable or exercisable for
shares of Common Stock, but excluding Excluded Securities (as defined
below).
Moreover,
from the last day of the 30 trading day period described in the preceding
paragraph until the second anniversary of the Closing Date, the Company will
not, directly or indirectly, effect any sale, grant of any option to purchase,
or other disposition of any of its or its subsidiaries' equity or equity
equivalent securities (other than Excluded Securities) without first providing
written notice to each Buyer of any proposed or intended issuance or sale or
exchange of securities being offered by the Company, which notice shall
constitute an offer by the Company to issue and sell to the Buyers an aggregate
amount equal to 30% of such offered securities on terms that are at least as
favorable to the Company as those set forth in such offer notice and in
accordance with the procedures provided in the Securities Purchase
Agreement.
The
Company's Certificate of Incorporation currently authorizes it to issue up to
70,000,000 shares of Common Stock. The Company has agreed to hold a meeting of
its stockholders not later than April 30, 2006 to seek its stockholders'
approval of, among other things, (i) the Company's issuance of the Series C
Preferred and the Warrants to the Buyers, and the Common Stock issuable upon the
conversion of the Series C Preferred, upon the exercise of the Warrants, and as
dividends in respect to the Series C Preferred in accordance with applicable law
and the rules and regulations of the Nasdaq SmallCap Market, or if the Common
Stock is no longer listed on the Nasdaq SmallCap Market, then the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market (any such market on
which the Common Stock is listed on any date of determination shall be
hereinafter referred to as the "Principal Market"), and (ii) an amendment
to its Certificate of Incorporation to authorize the increase of the number of
authorized shares of the Company's Common Stock. In the event that the Company's
stockholders do not approve the matters described in the preceding sentence at
or prior to the 2006 annual meeting of the Company's stockholders or at
subsequent meetings called for that purpose, the Company is required to redeem
the outstanding shares of Series C Preferred at the Redemption Price (as
defined in the Series C Certificate of Designations).
The
Securities Purchase Agreement contains representations and warranties by the
Company concerning, among other things, its equity capitalization, business and
properties (which representations and warranties survive termination of the
Securities Purchase Agreement). The Company agrees to indemnify the Buyers for,
among other things, breaches of the Company's representations, warranties and
covenants under the Securities Purchase Agreement, and certain third party
actions. The Company's indemnification obligations are not subject to any
maximum dollar limitation.
Description
of Series C Preferred Stock
The terms
of the Series C Preferred are set forth in the Certificate of Designations
thereof. Each share of Series C Preferred will bear a cumulative dividend equal
to 7% per annum of its original purchase price. Dividends will accrue daily from
the Closing Date, and will be payable quarterly in shares of Common Stock
(provided that at such time the Company is in compliance with certain conditions
related to its securities ("Equity Conditions")) or, at the option of the
Company, in cash. Dividends paid in shares of Common Stock shall be paid in a
number of shares equal to the quotient of (i) the amount of such dividend
payment divided by (ii) 95% of the arithmetic average of the dollar
volume-weighted average price for the Common Stock on the Principal Market
("Weighted Average Price") on each of the five consecutive trading days
immediately preceding (but not including) the relevant dividend
date.
In the
event of (i) the liquidation, dissolution or winding up of the Company or
such subsidiaries of the Company the assets of which constitute all or
substantially all the assets of the business of the Company and its subsidiaries
taken as a whole, in a single transaction or series of related transactions (a
"Liquidation"), or (ii) a change of control of the Company (any event
described in clauses (i) and (ii) is referred to as a "Liquidation Event"), each
holder of Series C Preferred then outstanding shall be entitled to receive in
cash out of the assets of the Company available for distribution to its
stockholders, after all amounts which are payable to the holders of Series A
Preferred Stock, par value $.001 per share ("Series A Preferred") and Series B
Preferred Stock, par value $.001 per share ("Series B Preferred") have been
paid, and before any amounts which are payable to the holders of any of the
capital stock of the Company of any class junior in rank to the Series C
Preferred in respect of liquidation preferences have been paid, an amount per
share of Series C Preferred equal to (x) if such Liquidation Event is
a Liquidation, the original purchase price for such share plus 120% of all
accrued but unpaid dividends on such share, and (y) if such Liquidation
Event is a change of control of the Company, 120% of the sum of the original
purchase price for such share plus all accrued but unpaid dividends on such
share.
Each
holder of Series C Preferred may convert any whole number thereof into shares of
Common Stock at a conversion rate per share of Series C Preferred (the
"Conversion Rate") equal to the quotient of (i) the original purchase price
for such share divided by (ii) a conversion price (the "Conversion Price")
which is the lesser of (x) $2.00 (subject to adjustment as described herein and
as provided in the terms of the Series C Preferred, the "Standard Conversion
Price") and (y) the Interim Conversion Price (as defined below). Such
Conversion Price and all price determinations in respect of the Series C
Preferred will be appropriately adjusted to reflect any stock split, stock
dividend, stock combination or other similar transaction that occurs during any
applicable period.
"Interim
Conversion Price" means the arithmetic average of the Weighted Average Price of
the Common Stock for each of the 10 consecutive trading days ending on the
trading day immediately preceding the date of the applicable conversion notice;
provided, that unless consented to by the Company and holders of
a
majority of the outstanding
Series C
Preferred, the Interim Conversion Price shall not be less than $1.00 prior to
the six month anniversary of the Closing Date (the "Interim Conversion Price
Limitation"). No holder of Series C Preferred may elect to use the Interim
Conversion Price in a conversion notice (the restrictions set forth below in
clauses (I), (II)(A), II(B) and (II)(C) of this paragraph shall be hereinafter
referred to collectively as the "Total Interim Limitations"):
(I)
during any period in which the Company has notified the holders of Series C
Preferred that such holders will be unable to elect in any conversion notice to
use the Interim Conversion Price (which suspension right is subject to certain
restrictions relating to frequency, duration and timing); or
(II) to
convert more than (A) during any 20 consecutive trading day period, 15% of
the number of shares of Series C Preferred issued to such holder on the
Closing Date, (B) during the first nine months following the Closing Date or
during any calendar quarter, 30% of the number of shares of Series C
Preferred issued to such holder on the Closing Date (the "30% Interim Conversion
Restriction") and (C) during any six month period, 35% of the number of shares
of Series C Preferred issued to such holder on the Closing Date at an
average Interim Conversion Price less than $1.25 (the Interim Conversion Price
Limitation and the restriction in clause (II)(C) hereof, collectively, the
"Interim Conversion Restrictions");
provided
that
(x) after the occurrence of a Triggering Event (as defined below) and until
such Triggering Event is cured, each holder of Series C Preferred shall have the
right to convert all or a portion of such holder's shares of Series C Preferred
without being subject to the Interim Conversion Restrictions, and (y) each
holder of Series C Preferred shall be entitled to convert its pro rata portion
(based on the number of shares of Series C Preferred purchased by such
holder on the Closing Date) of 2,000 shares of Series C Preferred without being
subject to the Interim Conversion Price Limitation or the Total Interim
Limitations.
"Triggering
Event" means any of the following events:
·
the
      failure of the Registration Statement to be declared effective by the SEC
      on or prior to the date that is 270 days after the Closing
      Date;
·
while
      the Registration Statement is required to be maintained effective pursuant
      to the terms of the Registration Rights Agreement, the effectiveness of
      the Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to the holders
      of Series C Preferred for sale of all of the Registrable Securities in
      accordance with the terms of the Registration Rights Agreement, and such
      lapse or unavailability continues for a period of 10 consecutive trading
      days (excluding days during any allowable grace period ("Grace Period")
      during which the Company may delay the disclosure of material, non-public
      information concerning the Company, the disclosure of which at the time is
      not, in the good faith opinion of the Board of Directors of the Company
      and its counsel, in the best interest of the Company and, in the opinion
      of counsel to the Company, otherwise required) and such holder's
      Registrable Securities covered by such Registration Statement cannot be
      sold without restriction pursuant to Rule 144(k) promulgated under the
      Securities Act;
·
the
      suspension from trading or failure of the Common Stock to be listed on the
      Principal Market for a period of 10 consecutive trading days or for more
      than an aggregate of 15 trading days in any 365-day period;
    or
·
the
      Company breaches in any material respect any representation, warranty,
      covenant or other term or condition of any Transaction Document, except,
      in the case of a breach of a covenant which is curable, only if such
      breach remains uncured for a period of at least five business
      days.
Any right
of the Company under the Series C Certificate of Designations to require the
conversion or redemption of shares of Series C Preferred shall be subject to the
satisfaction or waiver in writing by the applicable holder against whom the
Company shall exercise any such right, of the Equity Conditions from the date of
the relevant notice from the Company until the date of such conversion or
redemption. If at any time the Weighted Average Price of the Common Stock
exceeds 200% of the Standard Conversion Price on each of the 20 consecutive
trading days immediately preceding the date of determination, the Company has
the right on such date to require (upon written notice to the Buyers) that some
or all of the outstanding Series C Preferred be converted into shares of Common
Stock at the applicable conversion rate; provided that the Company may not
deliver notice of any such election within 30 trading days of any previous
notice of election.
If,
during the period commencing on the one month anniversary of the Registration
Effective Date through the date that is the later of (i) the first anniversary
of the Registration Effective Date and (ii) such time as a Buyer or its
transferee(s) holds less than 75% of the number of shares of Series C Preferred
issued to such Buyer on the Closing Date (the "Second Interim Conversion
Election Date"), (x) the closing sale price of the Common Stock immediately
preceding delivery by the Company of the applicable conversion election notice
under this provision of the terms of the Series C Preferred (the "Company
Interim Conversion Election Notice") shall be at least 120% of the Conversion
Price and (y) the number of shares of Common Stock traded on the trading day
immediately preceding delivery of the applicable Company Interim Conversion
Election Notice is at least eight times the aggregate number of shares set forth
in the applicable Company Interim Conversion Election Notice, then the Company
may require that up to 10% of the number of Series C Preferred issued to each
Buyer on the Closing Date be converted into shares of Common Stock at the
applicable Conversion Rate, subject to certain conditions and limitations
relating to frequency and timing of any Company Interim Conversion Election
Notice. The Company may lower the Conversion Price in a Company Interim
Conversion Election Notice in order to use the Company interim conversion option
described in this paragraph.
If, from
and after the Second Interim Conversion Election Date, (i) the closing sale
price of the Common Stock immediately preceding delivery by the Company of the
applicable Company Interim Conversion Election Notice shall be at least (A) if
the applicable Conversion Price is $1.25 or less, 114% of the applicable
Conversion Price and (B) if the applicable Conversion Price is greater than
$1.25, 108% of the applicable Conversion Price and (ii) the number of shares of
Common Stock traded on the trading day immediately preceding delivery of the
applicable Company Interim Conversion Election Notice is at least five times the
aggregate number of shares set forth in the applicable Company Interim
Conversion Election Notice, then the Company may require that up to 10% of the
number of Series C Preferred issued to each Buyer on the Closing Date be
converted into shares of Common Stock at the applicable Conversion Rate, subject
to certain conditions and limitations relating to frequency and timing of any
Company Interim Conversion Election Notice. The Company may lower the Conversion
Price in a Company Interim Conversion Election Notice in order to use the
Company interim conversion option described in this paragraph.
From and
after the date that is the 18 month anniversary of the Closing Date, the Company
may elect, upon 15 trading days' prior written notice (each, an "Installment
Notice") to the holders of Series C Preferred, to convert or redeem 500 shares
of Series C Preferred pro rata from the holders of the Series C Preferred (based
on the number of shares of Series C Preferred then held by each such holder
compared to the total number of outstanding shares of Series C Preferred then
outstanding); provided that each Installment Notice shall be at least
25 trading days from the date of any prior Installment Notice. If the
Company elects in its Installment Notice to redeem such shares of Series C
Preferred, the applicable redemption amount per shares will be an amount in cash
equal to the original purchase price paid by such holder for such share on the
Closing Date. If the Company elects in its Installment Notice to convert such
shares of Series C Preferred, then such shares will be converted at a conversion
rate based on a price which shall be computed as 95% of the arithmetic average
of the Weighted Average Price of the Company Common Stock on each of the 10
consecutive trading days immediately preceding the applicable installment
conversion date.
If any
shares of Series C Preferred remains outstanding on April 25, 2008, the Company
shall redeem each such share for an amount in cash equal to the original
purchase price therefor plus any accrued but unpaid dividends in respect of each
such share of Series C Preferred.
The
Conversion Price will be subject to adjustment in the event of stock dividends
and splits, combinations, mergers, consolidations, and other similar events. A
"weighted average" antidilution adjustment will be made to the Standard
Conversion Price upon any issuance by the Company of Common Stock (or securities
convertible into or exercisable for shares of Common Stock) at a consideration
per share less than the Standard Conversion Price then in effect immediately
prior to such time, with the following issuances being excluded from such
adjustment (collectively, "
Excluded
Securities
"):
(a)
in
connection with an any employee benefit plan which has been approved by the
Board of Directors of the Company, pursuant to which the Company's securities
may be issued to any employee, officer, consultant or director for services
provided to the Company;
(b)
upon the
issuance or upon conversion of the Series A Preferred or Series B Preferred or
upon the issuance or exercise of warrants to purchase Common Stock which shall
be issued by the Company contemporaneously with any issuances of Series B
Preferred; provided that such issuance of shares upon issuance, conversion or
exercise, as applicable, is made pursuant to the terms of the Certificate of
Designations for such Series A Preferred, the Certificate of Designations for
such Series B Preferred and the warrants in the form attached to the Dow
Purchase Agreement and such preferred stock or warrants are not amended in any
respect material to the holders of Series C Preferred after the Closing Date;
(c)
upon
issuance of the shares of Series C Preferred or the Common Stock issuable upon
conversion of the Series C Preferred or issued as dividends in respect thereof
or upon exercise of the Warrants;
(d)
issued
upon exercise of any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities (as defined below) or any stock or
securities (other than such rights, warrants or options) directly or indirectly
convertible into or exchangeable or exercisable for Common Stock ("Convertible
Securities") which are outstanding on the date immediately preceding the
execution date of the Securities Purchase Agreement, provided that such issuance
of shares of Common Stock upon exercise of such rights, warrants, options or
Convertible Securities is made pursuant to the terms of such rights, warrants,
options or Convertible Securities in effect on the date immediately preceding
the execution date of the Securities Purchase Agreement and such rights,
warrants, options or Convertible Securities are not amended after the date
immediately preceding such date;
(e)
issued
for consideration other than cash pursuant to a merger, consolidation,
acquisition or similar business combination the primary purpose of which is not
to raise equity capital;
(f)
issued in
connection with any stock split, stock dividend, recapitalization or similar
transaction by the Company for which adjustment is made pursuant to the terms of
the Series C Preferred;
(g)
issued as
consideration, whether in whole or in part, to any person or entity for
providing services or supplying goods to the Company;
(h)
issued to
any entity which is or will be, itself or through its subsidiaries or
affiliates, an operating company in a business related to or complementary with
the business of the Company and in which the Company receives material benefits
in addition to the investment of funds;
(i)
issued
pursuant to any equipment leasing arrangement;
(j)
issued to
pay all or a portion of any investment banking, finders or similar fee or
commission, which entitles the holders thereof to acquire shares of Common Stock
at a price not less than the market price of the Common Stock on the date of
such issuance and which is not subject to any adjustments other than on account
of stock splits and reverse stock splits; and
(k)
as may be
mutually agreed in writing prior to their issuance by the Company and holders of
a majority of the outstanding Series C Preferred.
If any of
the following shall occur (each, a "Redemption Event"):
(A)
a
holder's pro rata portion of the number of shares of Common Stock reserved for
conversions of the Series C Preferred is less than the number of shares of
Common Stock that such holder would be entitled to receive upon a conversion of
all of such holder's shares of Series C Preferred, and such deficiency continues
for more than 10 business days;
(B)
the
number of shares of Common Stock registered pursuant to the Registration
Statement for any holder of Series C Preferred is less than the number that such
holder would be entitled to receive upon a conversion of all of such holder's
shares of Series C Preferred; or
(C)
the
Company fails or is unable to issue or deliver any shares of Common Stock within
10 business days of any conversion or attempted conversion by a holder of shares
of Series C Preferred in accordance with the notice provisions of the terms of
the Series C Preferred,
then each
holder of Series C Preferred shall have the right, at such holder's option, to
require the Company to redeem a number of such holder's shares of Series C
Preferred Shares equal to (i) with respect to a Redemption Event described in
clauses (A) and (B) above, the number of underlying shares of Common Stock that
are not authorized or registered, as applicable, and (ii) with respect to a
Redemption Event described in clause (C) above, the
number of
underlying shares that the Company fails or is unable to convert
in such
conversion. The redemption price per share of Series C Preferred payable shall
be equal to the greater of (x) 120% of the original purchase price of such
shares of Series C Preferred on the Closing Date, and (y) the product of (1) the
conversion rate in effect at such time as such holder delivers a notice of its
option to require redemption to the Company and (B) the closing sale price of
the Common Stock on the trading day immediately preceding such Redemption Event.
Failure
by the Company to comply with certain of its conversion and redemption
obligations under the terms of the Series C Preferred will entitle the holder of
the shares to be converted or redeemed to cash damages and the right to void the
relevant conversion or redemption, as the case may be, and adjust the Standard
Conversion Price with respect to the shares of Series C Preferred that were the
subject of the attempted conversion or redemption.
The
shares of Series C Preferred will have its right to vote with the Common Stock
as a single class on an "as-converted" basis, except that for so long as at
least 25% of the number of shares of Series C Preferred issued to the Buyers on
the Closing Date are outstanding, the Company is prohibited from taking certain
actions that have an adverse effect on the Series C Preferred, without the
consent of the holders of a majority of the outstanding Series C
Preferred.
Prior to
the second anniversary of the Closing Date, the Company will not, without the
consent of the holders of a majority of the outstanding Series C Preferred,
directly or indirectly, incur or guarantee, assume or suffer to exist any
Indebtedness (as defined in the Series C Certificate of Designations) other
than (i) indebtedness existing as of the execution date of the Securities
Purchase Agreement and (ii) certain indebtedness that may in the future be
owed to Dow. From and after the second anniversary of the Closing Date, and so
long as the Series C Preferred shares are outstanding, the Company will not,
without the consent of the holders of a majority of the outstanding Series C
Preferred, directly or indirectly, redeem, defease, repurchase, repay or make
any payments in respect of, by the payment of cash, all or any portion of any
principal amount of any indebtedness incurred after the second anniversary of
the Closing Date, other than payments in respect of certain indebtedness that
may in the future be owed to Dow.
Description
of Warrants
Pursuant
to the Securities Purchase Agreement, on the Closing Date, the Company issued
Warrants to each Buyer. The Warrants shall be fully vested upon issuance and
shall have a three year term. The Warrants are be exercisable for a number of
shares of Common Stock ("Warrant Shares") equal to 25% of the number of shares
of Common Stock into which the shares of Series C Preferred are convertible
on the Closing Date pursuant to the terms of the Series C Preferred, at a
per share exercise price equal to $2.00, which exercise price is payable in cash
except as set forth below. If a Registration Statement covering Warrant Shares
that are the subject of a holder's exercise notice is not then in effect, such
holder may, in its discretion, exercise such holder's Warrant in whole or in
part through a cashless exercise in which the holder will be issued a net number
of Warrant Shares based on the relationship of the exercise price to the market
price at the time of exercise.
The
Warrants will be subject to a six-month holding period from the date of grant.
The exercise price of the warrants will be subject to identical antidilution
protection as the Series C Preferred. See "Description of Series C Preferred
Stock." The shares of Common Stock issuable upon exercise of the Warrants will
be registrable securities under the Registration Rights Agreement.
Registration
Rights Agreement
On April
20, 2005, the Company and the Buyers entered into a Registration Rights
Agreement. The Registration Rights Agreement provides for the registration for
resale of (i) shares of Common Stock issuable upon conversion of the Series C
Preferred, (ii) the Warrant Shares issued or issuable upon exercise of the
Warrants, (iii) any shares of Common Stock issued or issuable with respect to
dividends payable in respect of the shares of Series C Preferred and (iv)
any shares of Common Stock issued or issuable with respect to any of the
foregoing following a stock split, stock dividend recapitalization, exchange of
similar event (the "Registrable Securities").
Pursuant
to the Registration Rights Agreement, the Company is required to prepare and
file with the SEC, as soon as practicable but in no event later than 30 days
after the Closing Date, a shelf registration statement registering the
Registrable Securities for resale, and to use its best efforts to cause the
registration statement to be declared effective by the SEC as soon as
practicable, but in no event later than 90 days after the Closing Date.
If
(i) the Company fails to file the Registration Statement prior to the
filing deadline, (ii) the Company fails to cause the Registration Statement to
be declared effectiveness on or before the 45th day after the effectiveness
deadline or (iii) after the Registration Statement is declared effective by
the SEC, sales of the Registrable Securities included therein cannot be made for
more than five business days pursuant to such Registration Statement (other than
during an allowable Grace Period), the Company will be required to pay to each
holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to 1.0% of the aggregate purchase price of such holder's
Registrable Securities for each 30-day period until such failure is cured,
except if such failure is the result of the failure of such holder to provide
the Company with information reasonably requested by the Company and necessary
to complete, amend or supplement the Registration Statement or the result of the
Buyer's legal counsel to provide timely comments or objections to the
Registration Statement.
All
reasonable expenses, other than underwriting discounts and commissions and as
set forth below, incurred in connection with registrations, filings or
qualifications pursuant to the Registration Rights Agreement shall be paid by
the Company. The Company shall reimburse the holders of Registrable Securities
for the fees and disbursements of legal counsel in connection with registration,
filing or qualification pursuant to the Registration Rights Agreement which
amount shall be limited to $10,000 in the aggregate.
Pursuant
to the Registration Rights Agreement, the Company shall indemnify each Buyer
from and against any liabilities arising out of material misstatements or
omissions set forth in the Registration Statement or any prospectus included
therein, subject to standard exceptions.
Security
Agreement; Account Control Agreement
The
payment of dividends with respect to the shares of Series C Preferred and
certain obligations of the Company under the Transaction Documents are secured
by the balance in a cash collateral account established by the Company prior to
the Closing Date. Such security interest is evidenced and effected by
(i) the Account Control Agreement dated as of April 25, 2005 among the
Company, Portside Opportunity & Growth Fund, as agent for the Buyers, and
Wachovia Bank, and (ii) the Security Agreement dated as of April 25,
2005 between the Company and Portside Opportunity & Growth Fund, as
collateral agent for the Buyers. The Account Control Agreement also provides for
the distribution of the funds in the cash collateral account to either the
Buyers or the Company upon certain circumstances.
Voting
Agreement
In order
to induce the Buyers to enter into the Securities Purchase Agreement, on April
25, 2005, certain stockholders of the Company entered into a Voting Agreement
with the Company whereby each such stockholder agreed that, at any special or
annual meeting of the stockholders of the Company, and in any action by written
consent of the Company's stockholders, in each case for the purpose of
considering and approving the Company's issuance of all of the shares of Common
Stock issued and issuable upon conversion of the shares of Series C
Preferred and exercise of the Warrants and as otherwise described in the
Transaction Documents in accordance with applicable law and the rules and
regulations of the Principal Market (the "Stockholder Approval"), such
stockholder will vote the Common Stock owned by the Stockholder, any shares of
Common Stock issuable upon the exercise of any options owned by such stockholder
(to the extent any such options have been exercised) and any other securities
held by such stockholder in favor of the Stockholder Approval.
Item
3.02.
Unregistered
Sales of Equity Securities
.
As
reported more fully in Item 1.01 above and incorporated herein by reference, in
connection with the consummation of the Offering, the Company issued to the
Buyers 10,000 shares of the Company's Series C Preferred, at a purchase
price of $1,000 per share, and Warrants to purchase a number of shares of Common
Stock equal to 25% of the number of shares of Common Stock into which the shares
of Series C Preferred are convertible on the initial issuance date pursuant
to the terms of the Series C Preferred. The terms of the Series C Preferred
and Warrants are summarized herein and are set forth in their entirety in the
Series C Certificate of Designations and form of Warrant attached
hereto.
The
private placement of the Series C Preferred and the Warrants was made in
reliance upon the exemption from registration provided for in Section 4(2) of
the Securities Act, and Rule 506 of Regulation D promulgated thereunder. Each
Buyer in the Offering represented to the Company that it is an accredited
investor, as defined by Rule 501 promulgated under the Securities Act, and
certificates representing purchased shares of Series C Preferred and the
Warrants issued in connection with the Offering will contain appropriate legends
to reflect the restrictions on transfer imposed by the Securities
Act.
Item
5.02.
Departure
of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers
.
On April
21, 2005, the Board of Directors of the Company appointed Adam P. Briggs as
President, H. David Ramm as Chief Executive Officer and John D. Giolli as Chief
Financial Officer and Corporate Secretary. The Company issued a press release on
April 22, 2005 to annouce the appointments. A copy of the press release is
attached hereto as Exhibit 99.2 and is incorporated herein by
reference.
Item
9.01.
Financial
Statements and Exhibits
.
(c)
Exhibits.
4.1
Form
      of Certificate of Designations, Preferences and Rights of Series C
      Convertible Preferred Stock
10.1.
Securities
      Purchase Agreement, dated April 20, 2005, among the Company and the
      investors listed on the Schedule of Buyers attached
  thereto
10.2.
Form
      of Warrant to Purchase Common Stock
10.3
Registration
      Rights Agreement, dated April 20, 2005, among the Company and the
      investors listed on the Schedule of Buyers attached thereto
10.4
Security
      Agreement, dated as of April 25, 2005 between the Company and Portside
      Opportunity & Growth Fund, as collateral agent for the
      Buyers
10.5
Account
      Control Agreement, dated as of April 25, 2005 among the Company,
      Portside Opportunity & Growth Fund, as agent for the Buyers, and
      Wachovia Bank
10.6
Form
      of Voting Agreement
99.1
Press
      Release dated April 26, 2005, titled "Millennium Cell Announces $10
      Million Private Placement Financing"
99.2
Press
      release dated April 22, 2005, titled "Millennium Cell Announces Management
      Appointments"
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Millennium
Cell Inc.
By:
/s/ John
D. Giolli
Name:
John D. Giolli, CPA
Title:
Chief Financial Officer
and
Corporate Secretary
Date:
April 26, 2005