Contract analysis

I. EXECUTIVE SUMMARY This memorandum summarizes the principal unresolved issues in the Master Clinical Trial Agreement ("MCTA") between our client, Penterra Pharmaceuticals Corp. ("Penterra"), and Veridian Health Research Network, Inc. ("Veridian"), following our receipt of Veridian's second markup from its outside counsel, Whitmore, Jansen & Callahan LLP ("WJC"), on June 2, 2023. The purpose of this memorandum is to

1. Insurance Adequacy Dispute. Veridian has reduced its per-occurrence insurance demand from $50 million to $35 million but continues to press for coverage levels exceeding Penterra's existing Briarcliff Mutual policy. Veridian has also introduced new requirements relating to a subject-injury sublimit increase, extended reporting period ("tail") coverage, and material-reduction notification.

2. Protocol-Deviation Liability Allocation. Veridian proposes the creation of a new defined category — "Medically Necessary Protocol Deviations" — that would remain within the scope of sponsor indemnification. Veridian further seeks to elevate the negligence standard governing the indemnification carve-out to "gross negligence" and proposes the appointment of an Independent Medical Monitor to adjudicate deviation cla

3. Investigator Independence and Publication Rights. Veridian contests the additional 90-day patent filing delay, demands explicit anti-suppression and no-veto language, seeks reduced review periods for conference presentations, requests guaranteed authorship positions for the principal investigator, and proposes a Publications Committee mechanism. In addition to these three principal issues, several secondary matter

II. BACKGROUND AND PROCEDURAL HISTORY Calderwood & Harkness opened this matter on March 20, 2023, upon engagement by Penterra to negotiate and draft the MCTA governing the CLARION trial (Protocol PPC-4871-III), a Phase III, randomized, double-blind, placebo-controlled study of penterafenib (PPC-4871) in patients with advanced non-small cell lung cancer. The CLARION trial is being conducted under IND 157823 and is a p

III. OPEN ISSUE #1: INSURANCE ADEQUACY DISPUTE A. Current Penterra Position (as Reflected in Second Draft) The second draft MCTA requires Penterra to maintain clinical trial liability insurance throughout the term of the study and for a reasonable period thereafter. Penterra's current clinical trial liability policy is issued by Briarcliff Mutual Insurance Company under Policy No. BM-CTL-2023-04182, with the followin

1. Per-Occurrence Limit: Veridian now demands a minimum per-occurrence limit of $35,000,000, a reduction from the initial $50,000,000 demand but still $10,000,000 in excess of Penterra's current Briarcliff policy limit.

2. Subject-Injury Sublimit: Veridian insists on a minimum subject-injury sublimit of $15,000,000 per occurrence, compared to the Briarcliff policy's current sublimit of $10,000,000 per occurrence. This represents a $5,000,000 gap.

3. Material Coverage Reduction Notice: Veridian requests that the MCTA include a covenant prohibiting Penterra from materially reducing its insurance coverage during the term of the study without providing at least 60 days' prior written notice to Veridian.

4. Extended Reporting Period ("Tail") Coverage: This is a new request not previously raised. Veridian demands that Penterra maintain "tail" or extended reporting period coverage for at least 3 years following study completion. Given a projected study completion date of approximately August 2028, this would require coverage through approximately August 2031.

5. Annual Renewal Assurance: Veridian requests contractual assurance that Penterra will renew its insurance annually with identical or better coverage levels and will notify Veridian promptly if Briarcliff declines to renew the policy. C. Analysis and Recommended Response Per-Occurrence Limit. Penterra's $25,000,000 per-occurrence limit is consistent with prevailing industry benchmarks for Phase III oncology trials.

1. Fallback on Subject-Injury Sublimit. Should we instruct Karen Tremblay at Briarcliff to provide a supplemental quote for increasing the subject-injury sublimit from $10,000,000 to $15,000,000 per occurrence? If the premium increase is modest, this could serve as a fallback concession to close the gap on this issue without conceding on the per-occurrence limit. The decision to pursue this quote should be made promp

2. Internal Risk Management Coordination. If increasing the sublimit is feasible, we should coordinate with Jennifer Holt (VP, Risk Management, Penterra) to confirm that Penterra's internal risk management team would accept the premium increase and that the cost falls within the CLARION trial budget's insurance allocation. Any premium increase would need to be factored into the trial's overall financial model.

IV. OPEN ISSUE #2: PROTOCOL-DEVIATION LIABILITY ALLOCATION A. Current Framework in Second Draft The indemnification framework in the second draft MCTA allocates liability for subject injuries based on whether the investigational product was administered "in accordance with the Protocol." Under the current structure: Sponsor Indemnification (Section 10.1). Penterra agrees to indemnify, defend, and hold harmless Veridi

1. New Defined Category: "Medically Necessary Protocol Deviations." Veridian proposes the addition of a new defined term — "Medically Necessary Protocol Deviations" — encompassing deviations undertaken by the investigator in the exercise of clinical judgment to protect a subject's safety, health, or welfare. The proposed definition is broad, requiring only that the investigator have exercised "clinical judgment" in d

2. Sponsor Indemnification for Medically Necessary Deviations. Under the Veridian markup, Medically Necessary Protocol Deviations would not be treated as carve-outs from Penterra's sponsor indemnification. In other words, Penterra would continue to bear indemnification responsibility for subject injuries arising from protocol deviations, provided that the deviation was "medically necessary" as defined. This effective

3. Elevation of Negligence Standard. Veridian proposes that only "gross negligence or willful misconduct" by site personnel — rather than simple "negligence" — should trigger the carve-out from sponsor indemnification. This would mean that Penterra would remain obligated to indemnify sites for injuries resulting from ordinary negligence of site personnel, a significant expansion of the sponsor's risk.

4. Good Faith Standard. Veridian requests the addition of a subjective "good faith" standard, under which the sponsor indemnification would apply if the investigator deviated from the Protocol in a "good faith belief" that the deviation was required for subject safety. This standard is inherently difficult to evaluate and adjudicate, as it turns on the investigator's subjective state of mind at the time of the deviat

5. Independent Medical Monitor. Veridian proposes that the determination of whether a deviation was "Medically Necessary" be made by a jointly appointed Independent Medical Monitor — a mechanism not currently contemplated in the MCTA. If the parties and the Independent Medical Monitor cannot agree on classification, Veridian's markup provides for escalation to an independent expert panel. This would create a parallel

1. FDA Regulatory Perspective. Given that deviations from a Phase III protocol under IND 157823 may have regulatory consequences — including the potential for FDA to question the integrity of data collected during a deviation — I recommend that we consult with Castleton & Hargrove LLP (specifically Dr. Priya Sundaram) before the negotiation session to confirm that the proposed narrow definition of Medically Necessary

2. CRO Coordination. Meridian CRO (contact: Thomas Hartwell) is responsible for clinical monitoring of the CLARION trial across all Veridian Network sites. The monitoring plan will need to address the documentation and classification of protocol deviations, including any new reporting requirements. We should coordinate with Meridian to ensure that the contractual language is operationally workable and that Meridian's

V. OPEN ISSUE #3: INVESTIGATOR INDEPENDENCE AND PUBLICATION RIGHTS A. Current Framework in Second Draft The second draft MCTA addresses data ownership and publication rights in Article 12, with detailed terms set forth in Exhibit G (IP and Publication Rights). An IP side letter is being prepared concurrently to address joint inventions and related intellectual property matters. The current framework provides as follo

1. Reduced Patent Filing Delay. Veridian rejects the 90-day additional patent delay as excessive. WJC proposes a maximum additional delay of 45 days beyond the initial 60-day review period, for a total potential delay of 105 days from manuscript submission. WJC's cover letter characterizes the 90-day additional delay as "unprecedented in length" and "inconsistent with academic norms," though our review indicates that

2. Limited Scope of Review. Veridian demands that Penterra's review right be expressly limited to the identification and redaction of "Sponsor Confidential Information" (a new proposed defined term) and that the review right not extend to editorial control over scientific conclusions, data interpretation, or the investigators' characterization of study results.

3. Anti-Suppression / No-Veto Language. Veridian insists on explicit language confirming that: (a) Penterra may not suppress or prevent the publication of results, including negative or inconclusive results; and (b) Penterra's review right does not include a right to veto publication. The proposed language is absolute and does not include exceptions for trade secrets or proprietary manufacturing information.

4. Conference Presentations. Veridian proposes that investigators should have the right to present preliminary data at academic conferences — including poster and oral presentations — with only 30 days' prior notice to Penterra. Under this proposal, Penterra would have no review right over conference presentation materials; the 30-day period is characterized as a "courtesy notice" only.

5. Guaranteed Authorship for Principal Investigator. Veridian requests that the MCTA include a provision guaranteeing that Dr. Catherine Aldridge, as Global Principal Investigator, will have first or last authorship on all primary trial publications arising from the CLARION study. This is framed as a non-negotiable condition of Dr. Aldridge's continued participation.

6. Publications Committee. Veridian proposes the establishment of a Publications Committee to coordinate multi-center publications. Under the proposal, the committee would be chaired by the Global PI (Dr. Aldridge), with representation from Penterra, but Penterra would not have a controlling vote. All primary and secondary publications would be reviewed by the Publications Committee prior to submission for publicatio

1. Clinical Leadership Involvement. Whether Dr. Elaine Whitford or Dr. Marcus Yun should be involved in the discussions regarding publication governance, either at the negotiation session or through review of the proposed language. Their perspective on the clinical and scientific aspects of publication timing, authorship, and data sharing will be valuable.

2. Securities Law Considerations. Whether Ridgeline Capital Markets LLC (Penterra's financial advisor) has views on publication timing relative to Penterra's market-sensitive disclosures. The publication of negative or unexpected clinical data from the CLARION trial could have material effects on Penterra's stock price. I recommend coordinating with Nathaniel Briggs on any securities law considerations that should in

3. Patent Portfolio Strategy. The adequacy of the patent filing delay period is directly connected to Penterra's patent portfolio strategy for penterafenib. Consultation with Penterra's patent counsel regarding the types of patent claims that may arise from CLARION trial data and the realistic timeline for preparing and filing applications is essential to determining whether the proposed 60-day additional delay is su

VI. SECONDARY OPEN ISSUES In addition to the three principal open issues discussed above, the Veridian/WJC second markup raises several secondary matters that will need to be addressed. While these issues are less commercially significant individually, they should be resolved at the negotiation session to avoid further rounds of markup. A. Termination Wind-Down Payment Obligations The second draft MCTA provides for a

1. Continued Per-Patient Fees. Veridian proposes that Penterra continue to pay full per-patient fees ($52,000) for all subjects enrolled prior to the date of the termination notice, including all four milestone payments, regardless of whether the subject completes the full study protocol. Under this proposal, Penterra would owe the full per-patient fee even if the subject is transitioned to alternative care during th

2. Wind-Down Administrative Fee. Veridian proposes a "wind-down administrative fee" equal to 6 months of site maintenance fees, calculated at $20,000 per site, for each active site at the time of termination. If all 38 sites are active at termination, this would total $760,000 (38 sites × $20,000). Recommended Position. I recommend that Penterra accept continued milestone payments for subjects already enrolled throug

1. Simultaneous SAE Reporting. The current draft requires that SAE reports be submitted to Penterra, which then forwards the reports to Meridian CRO. Veridian proposes that SAE reports be submitted simultaneously to both Penterra and Meridian CRO. This is a procedural change that eliminates a potential delay in the information flow to the CRO and is consistent with the approach taken in the Meridian CRO Master Servic

2. Safety Data Sharing with Investigators. Veridian seeks confirmation that Penterra will promptly share all safety data and Data Safety Monitoring Board ("DSMB") reports with investigators, to the extent permitted by the blinding provisions of the Protocol. This is a standard request designed to ensure that investigators have access to the information they need to make informed clinical decisions for their subjects.

VII. RECOMMENDED NEXT STEPS Based on the foregoing analysis, I recommend the following next steps to advance the MCTA negotiation toward timely resolution:

1. In-Person Negotiation Session. Schedule an in-person negotiation session with Veridian (Gregory Callahan, EVP; Patricia Dunne, SVP Clinical Operations) and WJC (Allison Whitmore, David Kesselman) at WJC's offices in Philadelphia. I recommend targeting Friday, June 9, 2023, at WJC's offices at 1500 Market Street, Suite 3200, Philadelphia, Pennsylvania. A full-day session should be sufficient to work through the rem

2. Penterra Attendees. Attendees from the Penterra side should include: Miriam Calloway and Sean Morrissey from Calderwood & Harkness; and Rebecca Liang (Associate General Counsel, Clinical Affairs) and Samantha Novak (Director, Contract Negotiations) from Penterra. Depending on the outcome of our discussions regarding clinical leadership involvement, Dr. Whitford or Dr. Yun may also attend or be available by phone.

3. Preparation of Negotiation Materials. I will prepare detailed talking points and fallback positions for each of the open issues identified in this memorandum, as well as an authority parameters memo for Miriam's review and approval prior to the session. These materials should be in Miriam's hands no later than June 7, 2023.

4. Castleton & Hargrove Consultation. We should consult with Castleton & Hargrove LLP (Dr. Priya Sundaram) regarding the regulatory implications of the protocol-deviation language — specifically, whether the proposed narrow definition of "Medically Necessary Protocol Deviations" is consistent with FDA regulatory expectations for a Phase III study under IND 157823. This consultation should occur before the negotiation

5. Briarcliff Insurance Inquiry. We should instruct Karen Tremblay at Briarcliff Mutual to provide a supplemental quote for increasing the subject-injury sublimit from $10,000,000 to $15,000,000 per occurrence, and to confirm the feasibility and cost of a 2-year extended reporting period post-study completion. Having this information in hand at the negotiation session will give us flexibility to make a targeted conce

6. Clinical Leadership Input. We should seek input from Dr. Elaine Whitford (CMO) and Dr. Marcus Yun (SVP, Clinical Development) on the clinical acceptability of the proposed narrow definition of "Medically Necessary Protocol Deviations" and on the publication governance framework. Their views on these issues will strengthen our negotiating position and ensure that the contractual language is workable in practice.

7. Timeline and Execution Targets. The target is to resolve all remaining open issues at the in-person session on June 9. Following the session, I will circulate a near-final draft reflecting all agreed terms within one week (target: June 16, 2023). The target execution date for the MCTA is the end of June 2023, which preserves approximately six weeks of lead time before the August 14, 2023 FPI date.

8. Parallel Workstreams. It should be noted that IRB approvals and executed investigator signature pages remain conditions precedent to site activation that must proceed in parallel with the MCTA negotiation. The lead site's approval through Graystone IRB (Protocol No. IRB00012847) is currently under review, and Veridian Central IRB approvals for non-Pennsylvania sites must be initiated promptly upon MCTA execution.

VIII. APPENDIX: SUMMARY TABLE OF OPEN ISSUES The following table provides a summary of all open issues identified in the Veridian/WJC second markup, including the current positions of both parties, the gap, the recommended compromise, and the priority level assigned to each issue. I am available to discuss this memorandum and the recommended positions at your convenience. I will begin preparing the detailed talking p