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Item 1.01.
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Entry into a Material Definitive Agreement.
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On January 18, 2017, PharmAthene, Inc.,
a Delaware corporation (“PharmAthene”), entered into an agreement and plan of merger and reorganization (the “Merger
Agreement”), pursuant to which its wholly-owned subsidiary, Mustang Merger Sub, Inc., will be merged with and into Altimmune,
Inc., a Delaware corporation (“Altimmune”), with Altimmune as the surviving subsidiary (“Merger 1”), and
immediately thereafter, Altimmune will be merged with and into Mustang Merger Sub LLC, with Mustang Merger Sub LLC as the surviving
entity in such merger (“Merger 2”, and together with Merger 1, the “Mergers”). Following the consummation
of the Mergers, PharmAthene will change its name to Altimmune. The Mergers are intended to qualify as a “reorganization”
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Pursuant to the terms and conditions of
the Merger Agreement, at the effective time of Merger 1 (the “Effective Time”), each of Altimmune’s outstanding
shares of common stock and preferred stock (excluding Altimmune treasury shares, shares of Altimmune owned by PharmAthene or its
subsidiaries or dissenting shares) will be converted into the right to receive a number of shares of PharmAthene common stock such
that the holders of outstanding equity of Altimmune immediately prior to the Effective Time will own 58.2% of the outstanding equity
of PharmAthene immediately following the Effective Time and holders of outstanding equity of PharmAthene immediately prior to the
Effective Time will own 41.8% of the outstanding equity of PharmAthene immediately following the Effective Time (the “Exchange
Ratio”). No fractional shares of PharmAthene common stock will be issued in connection with the Mergers as a result of the
conversion described above, and any fractional share of PharmAthene common stock that would thereby be issuable will be rounded
up to the next whole share. In addition, all outstanding Altimmune options, as well as Altimmune’s 2001 Employee Stock Option
Plan and its Non-Employee Stock Option Plan, each as amended from time to time, will be assumed by PharmAthene. Each option or
warrant to purchase one share of Altimmune common stock will be converted into an option or warrant, as the case may be, to purchase
a number of shares of PharmAthene common stock representing the number of Altimmune shares for which the exchanged option or warrant
was exercisable multiplied by the Exchange Ratio. The exercise price will be proportionately adjusted.
In connection with the Merger Agreement,
Altimmune has entered into a definitive financing agreement (the “Altimmune Financing Agreement”) with certain of its
stockholders, pursuant to which such stockholders have irrevocably committed to: (i) participate in a private placement transaction
by Altimmune (the “Altimmune Private Placement”) of its convertible securities in an aggregate amount of not less than
$3.5 million of gross proceeds for Altimmune that is to be received by Altimmune prior to the Effective Time and (ii) participate
in a private placement of PharmAthene common stock to raise an aggregate of not less than $5.0 million of gross proceeds for PharmAthene
to be received by PharmAthene within 135 days of the closing date of the Mergers (the “Post-Closing Private Placement”).
At the Effective Time, a pro rata share
of PharmAthene common stock representing ten percent of the merger consideration issuable to the stockholders of Altimmune will
serve to secure the Altimmune stockholders’ indemnification obligations under the Merger Agreement and will be deposited
with Continental Stock Transfer & Trust, as escrow agent under a separate escrow agreement to be entered into prior to the
Effective Time. The escrow period will expire twelve months from the Effective Time.
The Merger Agreement provides that at, and
immediately after, the Effective Time the size of PharmAthene’s Board of Directors (the “Board”) will initially
consist of seven directors. This Board will be comprised of four directors designated by Altimmune and three directors designated
by PharmAthene. Altimmune’s current chief executive officer, Bill Enright, is expected to serve as the chief executive officer
of the combined company, and Altimmune’s current chief financial officer, Elizabeth Czerepak, is expected to serve as its
chief financial officer.
The Merger Agreement also obligates PharmAthene
to submit to its stockholders, at a special stockholder meeting, a proposal to approve the Mergers, approve and adopt an amendment
to its Certificate of Incorporation to authorize its Board of Directors to effect a reverse stock split prior to the Effective
Time at a reverse stock split ratio in the range mutually agreed to by Altimmune and PharmAthene’s Board of Directors, and
approve certain other related proposals specified in the Merger Agreement.
Each of PharmAthene and Altimmune have made
customary representations, warranties and covenants in the Merger Agreement. All such representations and warranties of Altimmune
(but not PharmAthene) will survive the completion of the Mergers and remain in full force and effect until twelve months after
the closing date of the Mergers. Completion of the Mergers is subject to a number of conditions, including, among other things,
approval by the stockholders of PharmAthene and Altimmune.
The Merger Agreement contains certain termination
rights for each of PharmAthene and Altimmune, and further provides that, upon termination of the Merger Agreement under limited
specified circumstances following receipt of a superior offer, PharmAthene may be required to pay Altimmune a termination fee of
$2,000,000. In connection with the termination of the Merger Agreement upon certain circumstances, either party may be required
to pay the other party’s third party expenses up to $1,000,000. The termination of the Merger Agreement will not relieve
any party thereto from any liability or damages resulting from or arising out of any fraud or willful or intentional breach of
any representation, warranty, covenant, obligation or other provision contained in the Merger Agreement.
PharmAthene may terminate the Agreement if
Altimmune does not deliver Voting Agreements from holders of at least 65% of the outstanding shares of the Company’s Class
A Common Stock by 5:00 p.m. Eastern time on the Business Day after the date hereof.
The foregoing summary of the Merger Agreement
does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit
2.1, and which is incorporated herein by reference.
Voting Agreements
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Concurrently and in connection with the
execution of the Merger Agreement, certain of PharmAthene’s stockholders, who beneficially own approximately 4,861,743 of
the outstanding shares of PharmAthene common stock, entered into a voting agreement in favor of Altimmune (the “PharmAthene
Voting Agreements”), pursuant to which such PharmAthene stockholders will agree to vote their shares of PharmAthene common
stock in favor of the adoption of the Merger Agreement and against any amendment of PharmAthene’s certificate of incorporation
or bylaws or any other proposal or transaction involving PharmAthene, the effect of which amendment or other proposal or transaction
is to delay, impair, prevent or nullify the Mergers or the transactions contemplated by the Merger Agreement or change in any manner
the voting rights of any capital stock of PharmAthene. The Voting Agreements shall only be effective upon the Effective Time and
shall automatically terminate in the event of the termination of the Merger Agreement for any reason. The signatories thereto may
not sell or transfer their shares other than under specified circumstances pursuant to the Voting Agreements.
The foregoing description of the Voting
Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Voting Agreement, which
is filed as Exhibit 10.1, and which is incorporated herein by reference.
Lock-Up Agreements
Concurrently and in connection with the
execution of the Merger Agreement, certain of the officers, directors and stockholders of Altimmune, who in the aggregate held
approximately 67.7% of the outstanding shares of Altimmune capital stock as of January 17, 2017, entered into post-closing lock-up
agreements with PharmAthene (the “Altimmune Lock-up Agreements”). Pursuant to the Altimmune Lock-up Agreements, each
such stockholder will be subject to lock-up restrictions on the sale of PharmAthene common stock acquired in the Mergers. Such
restrictions will begin at the Effective Time and end 180 days after the Effective Time.
Concurrently and in connection with the
execution of the Merger Agreement, certain of the officers, directors and stockholders of PharmAthene, who in the aggregate beneficially
held approximately 7.04% of the outstanding shares of PharmAthene capital stock as of January 18, 2017, entered into post-closing
lock-up agreements (the “PharmAthene Lock-up Agreements”). Pursuant to the PharmAthene Lock-up Agreements, each such
stockholder will be subject to lock-up restrictions on the sale of PharmAthene common stock owned by them. Such restrictions will
begin at the Effective Time and end 180 days after the Effective Time.
The foregoing description of each of the
Altimmune Lock-Up Agreements and PharmAthene Lock-Up Agreements does not purport to be complete and is qualified in its entirety
by reference to the forms of Lock-Up Agreements, which are filed as Exhibits 10.2 and 10.3, and which are incorporated herein by
reference.