Yumanity Therapeutics Inc. entered into an Agreement and Plan of Merger and Reorganization to acquire Proteostasis Therapeutics, Inc. (NasdaqGM:PTI) for approximately $150 million in a reverse merger transaction on August 22, 2020. PTI will acquire all outstanding shares of Yumanity in exchange for newly issued shares of PTI common stock. Each outstanding Yumanity stock option and each outstanding Yumanity warrant will be assumed by PTI. Proteostasis will issue 119.1 million new shares to acquire Yumanity. Upon completion, it is anticipated that existing PTI shareholders will own approximately a 32.5% of the combined company and Yumanity shareholders will own 67.5% of the combined company, which will be subject to adjustment based on each company's outstanding equity ownership and PTI's net cash balance at the time of the closing of the merger. As of November 12, 2020, immediately after the consummation of the merger, based solely on the estimated Exchange Ratio, Yumanity securityholders would own approximately 70.9% of the Proteostasis common stock on a fully diluted basis and Proteostasis securityholders would own approximately 29.1% of the Proteostasis common stock on a fully diluted basis, subject to adjustment of Proteostasis' net cash at the Closing. In addition to the ownership in the combined company, PTI stockholders of record as of close of the merger, would receive a portion of any upfront payment from the monetization of its CF assets through contingent value rights or CVRs, entitling them to all net proceeds from any future milestones derived from the grand sale or transfer of rights by PTI through a transaction completed from now and the closing of the merger. PTI stockholders of record would also be entitled to a portion of any net proceeds from the transaction completed within 9 months of the closing of the merger. Simultaneously, with the execution of the Merger Agreement, certain officers and directors of PTI and Yumanity entered into lock-up agreements pursuant to which the signatories to the Lock-Up Agreements accepted certain restrictions on transfers of any shares of PTI's common stock for the 180-day period following the Effective Time. After completion of the merger, Proteostasis will be renamed “Yumanity Therapeutics, Inc.” and is expected to trade on The Nasdaq Capital Market under the symbol “YMTX”. PTI may be required to pay Yumanity a termination fee of $2.1 million and Yumanity may be required to pay PTI a termination fee of $4.4 million if the merger agreement is terminated under any circumstances. The corporate headquarters will be in Boston, Massachusetts, at Yumanity's existing corporate facilities. In conjunction with merger announcement, PTI has reduced its workforce by 79%.

N. Anthony Coles, Managing Director, Chairman and Co-founder of Yumanity will remain as Chairperson. Sheila Wilson, PTI's Chief Operating Officer will leave PTI effective August 27, 2020. Richard Peters, President, Chief Executive Officer and Director of Yumanity, will become President, Chief Executive Officer and Director of the combined company. Yumanity Chief Executive Officer Richard Peters and Yumanity directors and management team will lead combined company. The Board of Directors of the combined company will include all 7 existing Yumanity directors and 2 of the existing PTI directors to be decided on prior to the closing of the transaction. As per filing dated October 28, 2020 the executive management team of Proteostasis is expected to be composed of Paulash Mohsen as Chief Business Officer Brigitte Robertson as Chief Medical Officer along with N. Anthony Coles and Richard Peters. Following the Merger, the board of directors of Proteostasis will include Patricia L. Allen, Richard A. Heyman, Jeffery W. Kelly, Cecil B. Pickett, Lynne Zydowsky, David Arkowitz, N. Anthony Coles and Richard Peters.

The transaction is subject to regulatory approvals, PTI shareholder's approval approving among others, amendment to the certificate of incorporation of PTI effecting the Proteostasis Reverse Stock Split, approval of Yumanity stockholders, the listing of the consideration shares on the Nasdaq Global Market, the Registration Statement must have become effective, Yumanity must have effected a conversion of all of its outstanding convertible indebtedness into shares of Yumanity common stock, the lock-up agreements executed by certain officers, directors and stockholders of Proteostasis and Yumanity must continue to be in full force and effect, Yumanity Reorganization having been consummated immediately prior to the effective time, the Investor Agreements shall have been terminated and PTI having a minimum of $30 million in net cash at closing, Proteostasis must have delivered to Yumanity executed severance agreements consistent with the employment agreements and written resignations of the officers and directors of Proteostasis that are not continuing as officers and directors of Proteostasis following the merger, Proteostasis must have caused the new Board members of Proteostasis to be elected and others.

On November 6, 2020 parties entered in to first amendment agreement, the amendment amends the Yumanity closing condition in the Merger Agreement regarding the minimum PTI net cash that PTI must have at the closing of the Merger by reducing it from $30 million to $28 million. The transaction has been approved by the Board of Directors of PTI and Yumanity. Proteostasis' special meeting of stockholders will be held on December 16, 2020. As of December 22, 2020, Proteostasis Therapeutics's stockholders approved all the proposals related to the merger. The reverse stock split is expected to become effective on December 22, 2020. Subject to the satisfaction of customary closing conditions, the Merger is expected to close shortly following the effectiveness of the reverse stock split. The transaction is expected to close in fourth quarter of 2020.

William Sorabella of Gibson, Dunn & Crutcher LLP is advising MTS Health Partners, L.P. MTS Health Partners, L.P acted financial advisor for PTI. MTS Securities, LLC acted as fairness opinion provider for PTI. Miguel J. Vega, Marc Recht, Willam Corcoran, Joshua Friedman, Geoffrey Spolyar and Marianne Sarrazin of Cooley LLP acted as legal advisor for PTI. Stuart Cable, Artthur McGivern, Jesse Nevarez and John T. Haggerty of Goodwin Procter LLP acted as legal advisors for Yumanity. Innisfree M&A Inc. acted as proxy solicitor for PTI for a fee of $15,000 plus reasonable expenses. PTI paid a fee of $0.4 million to MTS Securities for rendering the fairness Opinion. Upon the consummation of the merger, PTI will be obligated to pay to MTS Health Partners, L.P. a fee equal to approximately $1.6 million, up to $0.5 million of which may be paid in the form of PTI's common stock.