Pursuant to the non-binding letter of intent, the company will acquire all of the issued and outstanding shares of Prologue for $13 million, consisting of $4.5 million in cash and $8.5 million in a combination of non-convertible, non-redeemable senior subordinated debt and convertible, redeemable senior subordinated debt.
In addition to the $13 million in consideration that Encorium will pay to the existing Prologue security holders on closing of the transaction, Encorium has made a $500,000 non-refundable cash payment to Prologue in exchange for Prologue’s granting an exclusivity period to the company.
The closing of the Prologue transaction is subject to completion of Encorium’s due diligence, approval of the transaction by both parties’s board of directors and the signing of a definitive agreement. The closing is expected to occur in the third quarter of 2008.
The company intends to fund the cash portion of the purchase price with a loan procured by Chardan Capital in the amount of $5 million. It is anticipated that the loan will bear interest at a rate not greater than 10% per annum and will be senior unsecured debt.