Contract analysis

I. Executive Summary This memorandum summarizes the findings of our corporate due diligence review of Veridian Biosciences, Inc. ("Veridian" or the "Company") in connection with the proposed acquisition by our client, Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer"), of 100% of the outstanding capital stock of Veridian for an aggregate purchase price of $900,000,000 in cash (the "Transaction"), to be consum

1. Capitalization Complexity. Veridian has issued four series of preferred stock (Series A, Series B, Series C, and Series D) with varying liquidation preferences, conversion ratios, anti-dilution protections, and voting rights. The purchase price allocation among stockholders in the funds flow must account for these differing rights with precision.

2. Existing Investor Rights Obligations. The Investors' Rights Agreement, the ROFR/Co-Sale Agreement, and the Voting Agreement each contain provisions that will be triggered by or are otherwise relevant to the Transaction. Waivers and consents from the holders party to these agreements will be required, and the voting provisions should facilitate the delivery of the stockholder written consent necessary to approve th

3. Section 382 Ownership Change. The Series C preferred stock financing round that closed in Q3 2020 triggered a Section 382 ownership change, subjecting approximately $148 million in pre-change net operating losses to an annual limitation of approximately $5.9 million per year. This finding is discussed in detail in the Tax Due Diligence Memorandum prepared by Leonard Cross, dated May 28, 2024 (to be issued), and ha

4. Change-of-Control Provisions. The equity incentive plan contains change-of-control acceleration provisions that must be accurately reflected in the purchase price allocation, the treatment of outstanding equity awards, and the funds flow analysis. No impediments to proceeding with the Transaction have been identified from a corporate organizational standpoint, subject to the open items and follow-up actions descri

II. Formation and Good Standing A. Certificate of Incorporation Veridian Biosciences, Inc. was incorporated in the State of Delaware on September 14, 2016, by the filing of an original Certificate of Incorporation with the Delaware Secretary of State. The Company was originally incorporated under the name "Veridian Therapeutics, Inc." and subsequently changed its name to "Veridian Biosciences, Inc." in connection wit

III. Organizational Structure A. Subsidiaries. Based on our review of the Data Room documents, representations made by LAC in response to our due diligence request list, and our independent review of relevant state corporate records, Veridian does not have any subsidiaries, whether wholly owned or otherwise. The Company operates as a single corporate entity and does not hold any equity interests in any other entity,

IV. Capitalization A. Authorized and Outstanding Capital Stock As described in Section II.A above, the Restated Certificate authorizes the Company to issue an aggregate of 172,250,000 shares of capital stock, consisting of 100,000,000 shares of Common Stock and 72,250,000 shares of Preferred Stock (designated across four series). The following table summarizes the authorized and outstanding shares of each class and s

Section 382 Ownership Change. The Series C financing round resulted in a significant shift in Veridian's ownership structure, triggering a "change of ownership" under Section 382 of the Internal Revenue Code of 1986, as amended. As identified in the Tax Due Diligence Memorandum being prepared by Leonard Cross of our Tax Department (expected date of circulation: May 28, 2024), approximately $148 million in pre-change

I. Outstanding Warrants, Options, and Convertible Securities In addition to the stock options outstanding under the ESOP described in Section IV.F above, we have reviewed the Data Room for evidence of any other outstanding warrants, convertible notes, simple agreements for future equity (SAFEs), or other convertible securities. Our findings are as follows: (i) Warrants. The Company issued a warrant to purchase 150,00

V. Stockholder Agreements A. Investors' Rights Agreement We reviewed the Fourth Amended and Restated Investors' Rights Agreement, dated as of March 22, 2022 (the "IRA"), among Veridian, Crestline Ventures, LP, Boreal Health Partners Fund III, LP, Apex Growth Equity Fund II, LP, and the other institutional investors listed on the schedule of investors attached thereto (collectively, the "Investors"). The IRA was most

VI. Board of Directors and Governance A. Board Composition As of the date of this memorandum, the board of directors of Veridian consists of six (6) members, as follows: The board composition is consistent with the terms of the Voting Agreement described in Section V.C above. In addition to the six voting directors, each of Crestline Ventures, Boreal Health Partners, and Apex Growth Equity is entitled to designate on

VII. Material Corporate Actions and Transactions A. Prior Financing Rounds As described in Section IV above, Veridian has completed four rounds of preferred stock financing: (i) Series A (June 2017; $25.0 million): Led by Crestline Ventures, LP. (ii) Series B (November 2018; $48.0 million): Led by Crestline Ventures, LP, with participation from existing and new investors. (iii) Series C (Q3 2020; $169.9 million): Led

VIII. Compliance with DGCL and Corporate Formalities Based on our review, we have confirmed that Veridian has materially complied with the Delaware General Corporation Law and applicable corporate formalities, including the following: (a) Books and Records. The Company maintains books and records in accordance with Section 220 of the DGCL, including a stock ledger, minutes of stockholder and board meetings, and writt

IX. Indemnification and D&O Insurance We have reviewed the indemnification provisions contained in the Restated Certificate and the Bylaws. Article VII of the Restated Certificate provides for indemnification of directors and officers to the fullest extent permitted by the DGCL, including the elimination of personal liability of directors for monetary damages for breach of fiduciary duty to the maximum extent permitt