Dow Chemical to Continue Collaboration with Millennium Cell

June 04, 2006 by Jeff Shepard

Millennium Cell Inc. announced that the Dow Chemical Co. ("Dow") has elected to purchase $1.25 million of Millennium Cell's Series B-1 Convertible Preferred Stock under an option which became exercisable upon the achievement of the first milestone under the joint development agreement earlier this month. Dow also committed to continue its human resource commitment towards achievement of the second milestone. Dow has expressed its intent to maintain an investment in Millennium Cell and may periodically liquidate some or all of the shares it acquired at the inception of the joint development program.

In February 2005, Millennium Cell and Dow entered into a three-year, milestone-driven joint development program to collaborate on the development and commercialization of portable fuel cell systems for use in consumer electronics and military applications. These hydrogen batteries are based on Millennium Cell's patented Hydrogen on Demand® technology and proton exchange membrane fuel cells to convert hydrogen and oxygen to electricity. The milestones under the program include securing a development funding contract from the military and the subsequent development, manufacture and delivery of a prototype to meet the specifications of that contract. Since the program's inception, Dow has been providing a combination of business and technical resources to aid in the achievement of these milestones. As each milestone is achieved, Dow's resource commitment increases, as detailed in the definitive agreements signed by both companies. Upon achievement of each of the milestones, Dow is entitled to certain equity grants from Millennium Cell and, provided Dow has made all prior minimum investments, will have the right to purchase additional equity in Millennium Cell through cash investments up to a total of $5 million over the four milestones.

At a closing held earlier today, Dow purchased 71,429 shares of Series B-1 Preferred Stock for $1.25 million, and received detachable warrants to purchase 178,571 shares of the Company's common stock with an exercise price of $2.10 per share. Separately, Millennium Cell issued 138,150 shares of Series A2-1 Preferred Stock that were earned by Dow through human resource and intellectual property contributions toward achievement of the first milestone. The number of Series A Preferred shares issued was determined by subtracting the number of Series B-1 Preferred shares and related warrants purchased from 4% of the Company's fully diluted shares outstanding.

Millennium Cell has today filed with the Securities and Exchange Commission a Current Report on Form 8-K that sets forth additional information with respect to Dow's purchase of Series B Convertible Preferred Stock and related warrants as well as the grant of Series A Preferred Stock in consideration for the first milestone achievement.