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(Logo: http://www.newscom.com/cgi-bin/prnh/19991112/VAXGENLOGO)
Details of the Proposed Transaction
Under the terms of the agreement, VaxGen shall issue, and the holders ofRaven Series D preferred stock shall receive, in a tax-free transaction,approximately 32 million shares of VaxGen common stock. Following the closingof the transaction, VaxGen stockholders will own approximately 51 percent ofthe combined company, on a pro forma basis, and Raven Series D preferredstockholders will own approximately 49 percent. This ratio is subject toadjustment under certain circumstances described more fully in the mergeragreement, but in no event will VaxGen stockholders own less than 50.1 percentof the combined company on a pro forma basis. In addition, VaxGen will assumeRaven's debt and equipment lease obligations of approximately $1.8 million asof December 1, 2007. Raven Series D preferred stock warrants will beconverted into approximately 332,000 VaxGen common stock warrants. All otherRaven options and warrants will be cancelled.
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Completion of the transaction is conditioned upon the approval of thestockholders of both companies, as well as other customary closing conditions.Major Raven stockholders already have executed voting agreements in favor ofthe transaction. Further conditions to close include a requirement thatVaxGen relist its common stock on a national stock exchange, preparations forwhich are underway. VaxGen expects to file a Form S-4 and related proxystatement/prospectus with the U.S. Securities and Exchange Commission in thecoming weeks. The merger is expected to close in the first half of 2008.
Between signing and closing, Raven will receive a bridge loan of$3.8 million from the holders of Raven Series D preferred stock to fundoperating and transaction-related expenses. VaxGen will provide a bridge loanof up to $6 million to fund ongoing operations and to support advancement ofRaven's pipeline prior to the transaction's closing. All principal andaccrued interest due under the VaxGen loan is repayable in full in the eventthe transaction does not close. All principal and accrued interest due underthe loan from the holders of Raven Series D preferred stock will automaticallyconvert into shares of Series D preferred stock immediately prior to theclosing of the transaction. This conversion is reflected in the currentexchange ratio agreed to between the two companies.
Rationale and Pipeline
"We believe that the proposed merger of Raven and VaxGen will create a newcompany that can deliver value through its promising pipeline and technologyplatforms in one of the most scientifically and commercially promising areasof drug development," said George F. Schreiner, M.D., Ph.D., chief executiveofficer of Raven biotechnologies. "We expect that the transaction will allowthe new company to accomplish three objectives: first, to initiate Phase 2clinical trails for RAV12, our lead oncology product; second, to move our leadantibodies targeting cancer stem cells into the clinic; and third, to advanceour discovery platforms in cancer stem cell biology. We further expect thatthe new company will be well positioned to pursue collaborations withpharmaceutical companies and other str
