SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 21, 2002
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MILLENNIUM CELL INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 000-31083 22-3726792
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(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
1 INDUSTRIAL WAY WEST, EATONTOWN, NEW JERSEY 07724
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (732) 542-4000
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NOT APPLICABLE
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Item 5. Other Events
On June 19, 2002, Millennium Cell Inc. (the "Company") completed in escrow a $15
million private placement with two institutional and accredited investors (the
"Purchasers"), pursuant to the terms of a Securities Purchase Agreement among
the Company and the Purchasers (the "Purchase Agreement"). The escrow was
released on June 21, 2002. The private placement was exempt from registration
under the Securities Act of 1933, as amended, pursuant to Section 4(2) of such
Act. The placement consisted of the sale of 1,075,269 shares of Common Stock,
par value $0.001 per share (the "Common Stock") for gross proceeds of
$3,000,000 sold on June 19, 2002 (the "Closing Date"). In addition, pursuant to
the terms of the Purchase Agreement, the Purchaser is obligated, subject to
satisfaction of certain conditions that are outside of its control, to purchase
$12 million in Secured Convertible Debentures (the "Debentures"). The
Debentures will be due 3 years from the date of issuance of the Initial
Debentures (as defined below) and are convertible into Common Stock, initially
at a conversion price of $4.25. $9 million principal amount of the Debentures
(the "Initial Debentures") will be issued upon effectiveness of the
registration statement relating to the underlying shares of Common Stock and
the remaining $3 million (the "Additional Debentures") will be issued if,
among other things, shareholder approval, as required by the Rules of the
NASDAQ, is received and the registration statement remains effective. At the
direction of the Company, the proceeds from the sale of the Debentures will be
deposited in an interest-bearing bank account at First Union National Bank (the
"Bank"). The Company's obligations under the Debentures will be secured by a
standby letter of credit issued by the Bank with an aggregate face amount equal
to the outstanding principal of the Debentures. The proceeds from the sale of
the Debentures has been pledged by the Company as collateral to the Bank.
In connection with the sale of the Common Stock, the Company granted the
Purchasers a First Warrant (the "First Warrant") to purchase an aggregate of
268,817 shares of Common Stock at an exercise price of $3.93 per
share, which may change in the future based on certain anti-dilution and other
adjustments and is exercisable six months from the Closing Date. In connection
with the potential sale of the Initial Debentures, the Company will grant to
the Purchaser a second Warrant (the "Second Warrant") to purchase an aggregate
of 624,029 shares of Common Stock. In connection with the potential sale of the
Additional Debentures, the Company will grant to the Purchaser a third Warrant
(the "Third Warrant") to purchase 208,010 shares of Common Stock (the First
Warrant, Second Warrant and Third Warrant are referred to, collectively, as the
"Warrants"). The Second Warrant and the Third Warrant are exercisable at an
exercise price of $3.93, which may change in the future based on certain anti-
dilution and other adjustments, six months from the Closing Date and subject to
vesting based, in part, on the conversion of the Debentures into Common Stock.
The Company is obligated to register the resale of the shares sold in
the transaction and the Common Stock issuable upon the conversion of the
Debentures and exercise of the Warrants on a registration statement on Form S-3
(the "Registration Statement") to be filed with the Securities and Exchange
Commission (the "SEC"). The Company has agreed to file the Registration
Statement within 30 days after the Closing Date.
Debentures
Upon the effectiveness of the Registration Statement and the funding of the
Initial Debenture (the "Initial Settlement Date"), the Company will issue the
Initial Debentures in the aggregate principal amount of $9,000,000 with a
maturity date three years from the Initial Settlement Date. The Company has
agreed to use its best efforts to seek the approval of its shareholders, within
six months of the Closing Date, for the issuance of Common Stock as part of this
private placement in excess of 20% of the outstanding Common Stock on the date
of the Purchase Agreement. Upon receipt of such shareholder approval and
assuming the continued effectiveness of the Registration Statement and other
conditions, the Company will issue Additional Debentures in the aggregate
principal amount of $3 million with a maturity of three years from the Initial
Settlement Date. Interest accrues
daily on the outstanding principal amount of the Debentures at a rate per annum
equal to the rate of interest paid from time to time on money market accounts
held by the Bank and is payable quarterly in cash and, if certain conditions are
met, the interest payment may be accreted to principal of the Debentures. The
Debentures are convertible into shares of the Company's Common Stock (the
"Debenture Shares") at a price per share equal to the conversion price then in
effect. The initial conversion price of the Debentures is $4.25 and may be
reduced in the future at the option of the Company and based on certain
anti-dilution provisions.
Conversion of the Debentures and Conversion Price
The Debentures may be converted as follows:
(I) At any time after the earlier of (i) the 14th month anniversary of the
Closing Date and (ii) one year anniversary of the Initial Settlement Date,
the principal amount of the Debentures may be converted in whole or in
part at the option of the Company at a conversion price of $4.25 if (x)
the average closing price during 30 consecutive trading days following the
first anniversary of the Closing Date is equal to or greater than $5.10
and (y) the closing price for each of 15 trading days (which need not be
consecutive) during such 30 consecutive trading day period is equal to or
greater than $5.10 and the following conditions are met:
(a) the number of authorized but unissued and otherwise unreserved
shares of Common Stock is sufficient for such issuance;
(b) such shares of Common Stock are registered for resale by the
Purchasers pursuant to an effective Registration Statement, and the
prospectus thereunder is available for use by the Purchasers to sell
such shares or all such shares may be sold without volume
restrictions pursuant to Rule 144(k) under the Securities Act;
(c) the Common Stock is listed or quoted (and is not suspended from
trading) on the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market or the NASDAQ Small Cap Market
(each an "Eligible Market") and such shares of Common Stock are
approved for listing on such Eligible Market upon issuance;
(d) such issuance would be permitted in full without resulting in a
violation of the rules or regulations of the Eligible Market on
which such shares are listed or quoted;
(e) no event of default nor any event that with the passage of time and
without being cured would constitute an event of default has
occurred and not been cured; and
(f) no public announcement of a pending or proposed change of control
has occurred that has not been consummated.
(II) The holder of the Debentures may convert all or any portion of the
Debentures at any time.
(III) At any time and from time to time after (i) the later of the second month
anniversary of the Closing Date and the effectiveness of the Registration
Statement, with respect to the Initial Debentures or (ii) the date on
which the Initial Debentures shall no longer be outstanding, with respect
to the Additional Debentures, and if the conditions set forth in I(a)-(f)
above are met, the Company shall have the right, upon 10 trading days'
prior notice, to require the conversion of $500,000, subject to increase
under certain circumstances up to $2,500,000. The conversion prices for
the
Initial Debentures and the Additional Debentures, at the time and to the
extent of the conversion, will be determined in accordance with the
formulas in the following tables, based on the volume weighted average
closing price for the 10 trading days prior to the conversion:
A. Initial Debentures
CONVERSION AMOUNT % OF 10-DAY VWAP
The first $2,500,000 converted 88%
$2,500,001 to $5,000,000 90%
$5,000,001 to $7,500,000 92%
$7,500,001 to $9,000,000 94%
B. Additional Debentures
CONVERSION AMOUNT % OF 10-DAY VWAP
The first $1,000,000 converted 94%
$1,000,001 to $3,000,000 96%
Such conversion pursuant to I, II and III above, however, shall not be effected
to the extent that it would result in a holder of a Debentures owning, together
with its affiliates, more than 9.99% of the Company's Common Stock then
outstanding.
Prepayment
The holders of the Debentures have the right to require the Company to prepay
all or a portion of its Debentures, plus all accrued and unpaid interest
thereon, only if (i) during the 18 months immediately following the Closing
Date, the Company has not converted more than 66 2/3% of the original principal
amount of the Initial Debentures or (ii) at any time prior to the maturity date
of the Debentures, the Company issues shares of common stock or its equivalents
to any person (other than to strategic partners or the officers, directors,
employees or consultants pursuant to plans approved by the Company's directors).
The Company has the right to prepay the Debentures in whole or in part at any
time by paying the holder thereof 105% of the outstanding principal amount of
such Debentures and all accrued but unpaid interest thereon.
The Company must prepay the Debentures on the 20th trading day after the date on
which it or the holder of the Debentures sends notification of prepayment.
Acceleration of Debentures
Upon the occurrence of events of default under the Debentures, the holders
thereof may demand repayment of the principal amount of the Debentures then
outstanding, plus accrued and unpaid interest thereon, and may be entitled to
liquidated damages.
Security
The Company's obligations under the Debentures is secured by two standby letters
of credit, with a face amount equal to the outstanding principal of the related
Debenture. The proceeds from the sale of the Debentures are pledged as
collateral to the Bank. Under the terms of the Debentures, the face amount of
the related standby letter of credit will be reduced as the outstanding
principal amount of the related Debentures are reduced. Thus, as the Debentures
are converted or repaid, the face amount of the related standby letter of credit
will be reduced and likewise, the amount pledged to the Bank as collateral
relating to the standby letter of credit will be reduced. Accordingly, as the
Debentures are converted or repaid, the Company will be able to access the funds
raised from the sale of the Debentures in amounts corresponding to the portion
of the Debentures that is converted or repaid.
Warrants
The First Warrants to purchase 268,817 shares of Common Stock are exercisable
commencing six months from the Closing Date. The First Warrants may not be
exercised to the extent that a holder thereof would then beneficially own,
together with its affiliates, more than 9.99% of the Company's Common Stock then
outstanding.
The Second Warrant to purchase 624,029 shares of Common Stock will be issued on
the Initial Settlement Date and be exercisable as to 249,612 shares six months
from the Closing Date. The Second Warrant shall become exercisable after six
months from the Closing Date in the following manner: 1) an additional 249,612
after $3,750,000 of the Initial Debentures have been converted, 2) an additional
62,403 after $6,000,000 of the Initial Debentures have been converted, and 3)
the remaining 62,403 after $8,300,000 of the Initial Debentures have been
converted. The Second Warrant may not be exercised to the extent that a holder
thereof would then beneficially own, together with its affiliates, more than
9.99% of the Company's Common Stock then outstanding.
The Third Warrant to purchase 208,010 shares of Common Stock will be issued upon
the sale of the Additional Debentures and be exercisable as to 83,204 shares,
six months from the Closing Date. The Third Warrant shall become exercisable
after six months from the Closing Date in the following manner: 1) an additional
83,204 after $1,250,000 of the Additional Debentures have been converted, 2) an
additional 20,801 after $2,000,000 of the Additional Debentures have been
converted, and 3) the remaining 20,801 after $2,750,000 of the Additional
Debentures have been converted. The Third Warrant may not be exercised to the
extent that a holder thereof would then beneficially own, together with its
affiliates, more than 9.99% of the Company's Common Stock then outstanding.
Placement Agent Commission
The Company paid Bank of America Securities ("BOFA") as a placement agent
commission cash compensation of $500,000. The Company has agreed to pay
additional cash commissions to BOFA equal to 3% of the principal amount of the
Debentures as the Debentures are converted.
This summary description of the private placement transaction contemplated by
the Purchase Agreement does not purport to be complete and is qualified in its
entirety by reference to the Purchase Agreement and the other documents and
instruments that are filed as Exhibits hereto.
Item 7. Financial Statements and Exhibits.
Exhibit Exhibit
Number Index
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4.3 Securities Purchase Agreement dated as of June 19, 2002 between the
Company and the Purchasers.
4.4 Registration Rights Agreement dated as of June 19, 2002 between the
Company and the Purchasers.
4.5 First Warrant to Purchaser to Purchase 224,014 shares of Common
Stock dated as of June 19, 2002.
4.6 First Warrant to Purchaser to Purchase 44,803 shares of Common
Stock dated as of June 19, 2002.
4.7 Form of Secured Convertible Debenture.
4.8 Form of Second/Third Warrant to Purchase 624,029/208,010 shares of
Common Stock.
SIGNATURE
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 thereunto duly authorized.
MILLENNIUM CELL INC.
(Registrant)
By: /s/ Norman R. Harpster, Jr.
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Norman R. Harpster, Jr.
Vice President-Finance and
International Business-
Chief Financial Officer
Dated: June 25, 2002
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EXHIBIT INDEX
Exhibit Exhibit
Number Index
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4.3 Securities Purchase Agreement dated as of June 19, 2002 between the
Company and the Purchasers.
4.4 Registration Rights Agreement dated as of June 19, 2002 between the
Company and the Purchasers.
4.5 First Warrant to Purchaser to Purchase 224,014 shares of Common
Stock dated as of June 19, 2002.
4.6 First Warrant to Purchaser to Purchase 44,803 shares of Common
Stock dated as of June 19, 2002.
4.7 Form of Secured Convertible Debenture.
4.8 Form of Second/Third Warrant to Purchase 624,029/208,010 shares of
Common Stock.