| Pond Equities (the "Placement Agent") and the Company entered into a Placement Agency Agreement, dated as of March 3, 2006. Pursuant to the Placement Agency Agreement, in connection with the placement of the Debentures, the Placement Agent will receive a placement agent fee equal to (i) 10% of the aggregate purchase price (i.e., $600,000, one-half of which was paid at the initial closing and the remainder of which will be paid if the $3.0 million Security Deposit is released to the Company), (ii) 10% of the proceeds realized in the future from exercise of Warrants issued to the investors, and (iii) four warrants (the "Placement Agent's Warrants"). The Placement Agent's Warrants consist of (x) warrants to purchase an aggregate of 7,095,555 shares of common stock having an initial exercise price equal to $0.1693 per share, and (y) warrants to purchase an aggregate of 7,095,555 shares of common stock having an initial exercise price equal to $0.15 per share. One-half of the Placement Agent's Warrants will be delivered to the Placement Agent on the Closing Date, and the other one-half of the Placement Agent's Warrants will be held in escrow pending the Authorized Share Increase. Except as provided above, the Placement Agent's Warrants will have terms similar to the form of warrant issued to the Investors. In addition, the Company will pay legal and escrow agent fees to Investors' counsel and American Stock Transfer & Trust Company totaling approximately $60,000. |
