July 28, 2009 (FinancialWire) — Biodefense firm PharmAthene, Inc. (AMEX: PIP) said it has signed definitive agreements for the issuance of 2-year, 10% unsecured senior convertible notes and common stock purchase warrants in a private placement of around $19.3 million.

In connection with the placement, the company will receive gross cash proceeds of around $10.5 million from new investors, including an aggregate of around $8.5 million from unaffiliated investors, and will exchange around $8.8 million in outstanding principal and unpaid accrued interest under PharmAthene’s 8% senior unsecured convertible notes originally issued in August 3, 2007 and due August 3, 2009.

The company said it will use the cash proceeds from the sale of the notes and warrants will be used to repay around $5.7 million in principal and unpaid accrued interest due to holders of the “old notes” that have decided not to participate in the latest financing transaction.

PharmAthene also plans to use the funds to repay all remaining amounts, totaling around $2.7 million, due and owing under the company’s outstanding secured credit facility. It will also use the funds for other working capital purposes.

Interest on the notes will accrue at a rate of ten percent per year. The notes are convertible at any time after the closing into shares of PharmAthene’s common stock at a conversion price of $2.541667/share, which represents the closing price of the common stock on the NYSE AMEX onJuly 24 plus $0.041667.

Principal and interest are due at maturity two years from the closing of the private placement.

In connection with the transaction, the company will also issue warrants to purchase up to 2.6 million shares of PharmAthene common stock at $2.50 per share, the closing price of PharmAthene’s common stock on the NYSE AMEX onJuly 24. The warrants will be exercisable for a period of five years beginning six months after the closing of the private placement. PharmAthene develops and commercializes medical countermeasures against biological and chemical weapons.

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