Entelos had previously announced that the initial consideration would be satisfied by the issue of up to 12,776,658 Entelos shares but the working capital adjustment has reduced this payment to 9,278,771 shares.
Based on the closing price of 32.5 pence for Entelos shares on August 31, 2007 (being the effective date of acquisition), the initial consideration of 9,278,771 shares is valued at approximately $6.1 million and approximately $4.5 million at the closing price of 23.5 pence for Entelos shares on November 6, 2007, the last practicable date prior to the current announcement.
The merger agreement also provided for a potential maximum earn out payment of $25 million if certain financial milestones are achieved. A portion of the earn out payment, if any, will become payable on August 31, 2008, the one year anniversary of the effective date of the acquisition, and the remainder of any earn out payment will become payable thereafter based on the achievement of certain other milestones. Such deferred consideration is to be also satisfied in Entelos shares, which will be based on a 10-day average closing price for the period prior to any such earn out payment. In connection with this potential earn out payment the company issued 7,935,328 Entelos shares into an escrow account on September 6, 2007. Any earn out shares not issued to former Iconix shareholders will be returned to the company.
All of the shares to be issued in connection with the initial consideration will be subject to a lock up agreement that provides that subject to certain limited exemptions (including with the prior written consent of Entelos) the issued shares will not be disposed of for 12 months following the effective date of the merger of August 31, 2007. Earn out shares, if any, issued on August 31, 2008 will be subject to a six-month lock up from the date of issue.
Accordingly, as of now, Entelos current issued share capital comprises 75,442,515 ordinary shares, of which 7,935,328 have been issued into the escrow account referred to above.