Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the adequacy of Penterra Pharmaceuticals Corp.'s ("Penterra" or "Sponsor") clinical trial liability insurance policy issued by Briarcliff Mutual Insurance Company (Policy No. BM-CTL-2023-04182) (the "Briarcliff Policy" or the "Policy") against the subject-injury indemnification obligations and insurance requirements set forth in the executed Master Clinical Trial Agreemen

II. BACKGROUND A. The MCTA and the CLARION Trial Penterra Pharmaceuticals Corp. is the sponsor of Protocol PPC-4871-III, designated by Penterra as the CLARION trial — Clinical Assessment of Response with Longitudinal Investigation in ONcology. CLARION is a Phase III, randomized, double-blind, placebo-controlled clinical trial evaluating penterafenib (PPC-4871), an oral multi-kinase inhibitor targeting VEGFR-2, FGFR1-

1. Briarcliff Mutual Insurance Company, Clinical Trial Liability Insurance Policy No. BM-CTL-2023-04182, including the complete policy jacket consisting of the declarations page, coverage form (Form BM-CTL-2023, Ed. 01/23), all endorsements (including the Subject-Injury Sublimit Endorsement, Endorsement No. BM-CTL-SI-2023-01, and the Additional Insured Endorsement, Endorsement No. BM-CTL-AI-2023-07), the schedule of

2. The Master Clinical Trial Agreement between Penterra Pharmaceuticals Corp. and Veridian Health Research Network, Inc., execution version dated June 28, 2023, together with all exhibits and schedules thereto.

3. Exhibit D to the MCTA — Subject-Injury Indemnification Provisions (the "Indemnification Exhibit"), setting forth the scope, conditions, limitations, and caps applicable to Penterra's indemnification obligations with respect to subject injuries and related claims.

4. Exhibit E to the MCTA — Insurance Requirements and Certificate Forms, specifying the types and minimum limits of insurance required to be maintained by each party and the form of certificate of insurance to be exchanged.

5. The Indemnification Term Sheet dated May 5, 2023, exchanged between Calderwood & Harkness LLP and Whitmore, Jansen & Callahan LLP during the course of MCTA negotiations.

6. Certificate of Insurance issued by Briarcliff Mutual Insurance Company, dated June 28, 2023, together with the Additional Insured Endorsement (Endorsement No. BM-CTL-AI-2023-07) naming Veridian Health Research Network, Inc. and each of the 38 participating Veridian Network site institutions as additional insureds under the Policy.

7. Correspondence between Calderwood & Harkness LLP and Karen Tremblay, Vice President, Life Sciences Lines, Briarcliff Mutual Insurance Company, including letters dated May 15, 2023, June 2, 2023, and June 26, 2023, regarding the additional insured endorsement request, confirmation of policy terms, and delivery of the certificate of insurance. In addition to the foregoing, the undersigned has consulted the separate

III. MCTA INSURANCE REQUIREMENTS — DETAILED ANALYSIS A. Sponsor (Penterra) Insurance Obligations Under the MCTA The MCTA, through its Exhibit E (Insurance Requirements and Certificate Forms), imposes the following insurance obligations on Penterra as Sponsor: Minimum Coverage Limits. Penterra is required to procure and maintain, at its own cost and expense, clinical trial liability insurance providing coverage with m

IV. BRIARCLIFF POLICY ANALYSIS A. Policy Overview The Briarcliff Policy is summarized as follows: Briarcliff Mutual is a well-established specialty insurer with a long track record of underwriting clinical trial liability and life sciences risks. According to publicly available financial information, Briarcliff carries an A.M. Best rating of A (Excellent) with a stable outlook, and its statutory surplus as of the mos

V. ADEQUACY OF COVERAGE RELATIVE TO MCTA INDEMNIFICATION OBLIGATIONS A. Sponsor Indemnification Obligations Under the MCTA (Exhibit D) Exhibit D to the MCTA sets forth Penterra's subject-injury indemnification obligations. Under Exhibit D, Section 2, Penterra agrees to indemnify, defend, and hold harmless Veridian, each participating Veridian Network site institution, each principal investigator, each sub-investigato

1. Subject-Injury Sublimit vs. Medical Care Caps The most direct point of comparison for purposes of adequacy analysis is the relationship between the Briarcliff Policy's subject-injury sublimit and the MCTA's medical care indemnification caps. Per-Occurrence Analysis. The Briarcliff Policy's subject-injury sublimit of $10,000,000 per occurrence substantially exceeds the MCTA's per-subject medical care cap of $500,00

2. Product-Defect Claims (Uncapped Indemnification) The MCTA provides uncapped indemnification for claims arising from product defects in PPC-4871. This is the area of greatest potential exposure for both Penterra and, correspondingly, for the Briarcliff Policy, because there is no contractual ceiling on the amount of damages for which Penterra could be liable if a product defect were established. The Briarcliff Poli

3. Defense Costs As noted in Section IV.C above, the Briarcliff Policy provides that defense costs are included within — and therefore erode — the per-occurrence and aggregate limits. This means that if Penterra or an additional insured incurs substantial litigation defense costs in connection with a covered claim, those costs will reduce the amount of coverage available for the underlying indemnification payments. T

4. Breach/Negligence Claims The MCTA provides indemnification for losses arising from Penterra's breach of the MCTA or Protocol (Exhibit D, Section 2(c)) and from Penterra's negligence or willful misconduct (Exhibit D, Section 2(d)). Claims arising from breach or negligence would fall within the Briarcliff Policy's general clinical trial liability coverage, subject to the per-occurrence limit of $25,000,000 and the a

VI. GAPS AND RECOMMENDATIONS A. Identified Gaps or Areas of Concern Based on the foregoing analysis, the undersigned has identified the following gaps or areas of concern that, while not rising to the level of material inadequacy, warrant ongoing attention and, in certain cases, affirmative action by Penterra.

1. Annual Renewal Risk. The Briarcliff Policy must be renewed annually through at least August 2028 (projected study completion), and potentially through 2030 or 2031 to cover the tail period. Penterra should calendar each renewal date — the next renewal date being March 31, 2024 — and initiate the renewal process no later than 90 days prior to expiration of each policy period. Failure to maintain continuous clinical

2. Defense Cost Erosion. As noted in Sections IV.C and V.B.3 above, the Briarcliff Policy treats defense costs as within the stated per-occurrence and aggregate limits. In a complex, multi-party litigation scenario, defense costs could erode available coverage by several million dollars. Calderwood & Harkness should promptly seek written confirmation from Karen Tremblay at Briarcliff regarding the precise treatment o

3. Tail Coverage. Upon completion of the CLARION trial (projected August 2028), latent claims arising from delayed adverse events, long-term toxicity, or previously undetected safety signals from PPC-4871 could arise months or even years after the final study visit. While the occurrence-basis structure of the Briarcliff Policy provides significant protection (since coverage attaches based on when the injury-causing e

4. Aggregate Limit Erosion Across Multiple Trials. The declarations page of the Briarcliff Policy identifies Penterra Pharmaceuticals Corp. as the Named Insured and does not limit coverage to the CLARION trial alone. This raises the possibility that the $75,000,000 aggregate limit is shared across Penterra's entire clinical trial portfolio — which, based on publicly available information, includes at least four other

1. Defense Cost Confirmation. Request written confirmation from Karen Tremblay, Vice President, Life Sciences Lines, Briarcliff Mutual Insurance Company, regarding the treatment of defense costs under Policy No. BM-CTL-2023-04182 — specifically, whether defense costs are included within the stated per-occurrence and aggregate limits (as the Policy appears to provide) or are payable in addition to such limits. If defe

2. Aggregate Limit Status. Request written confirmation from Karen Tremblay that the $75,000,000 aggregate limit under the Briarcliff Policy has not been materially eroded by pending or paid claims arising from other Penterra-sponsored clinical trials. If the aggregate is shared across Penterra's portfolio, discuss the feasibility and cost of a dedicated aggregate endorsement for the CLARION trial.

3. Multi-Year Renewal Framework. Initiate discussions with Briarcliff regarding a multi-year renewal commitment or framework agreement that would provide Penterra with assurances of continued coverage at commercially reasonable terms for the projected duration of the CLARION trial (through at least August 2028, plus a tail period of two to three years). If a formal multi-year commitment is not available, request conf

4. Internal Notice-Cascading Protocol. Ensure that Penterra's internal legal team (Rebecca Liang, General Counsel), clinical operations team (Samantha Novak, VP, Clinical Operations), and regulatory affairs team (Jennifer Holt, VP, Regulatory Affairs) establish and maintain a written notice-cascading protocol that provides for the prompt relay of any site indemnification notice received under the MCTA to Briarcliff's

5. Certificate Exchange Calendar. Calendar the fifteen (15) business day certificate exchange deadline under Exhibit E of the MCTA (approximately July 19, 2023 for the initial certificates), as well as the annual certificate renewal obligations that will arise upon each renewal of the Briarcliff Policy. Ensure that renewed certificates of insurance, together with updated additional insured endorsements reflecting any

VII. OPINION Based on the analysis set forth in this memorandum, and subject to the qualifications and recommendations stated herein, it is the opinion of undersigned counsel that the Briarcliff Mutual Insurance Company clinical trial liability insurance policy, Policy No. BM-CTL-2023-04182, meets the insurance requirements set forth in the MCTA between Penterra Pharmaceuticals Corp. and Veridian Health Research Netw