Contract analysis

I. Executive Summary On August 22, 2024, the United States Food and Drug Administration ("FDA") imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application No. 154832 ("IND 154832"). VRD-4187 is Veridian Biosciences, Inc.'s ("Veridian" or the "Company") lead immuno-oncology candidate — a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3")-expressing tumors in patients with smal

II. Background A. The Transaction On June 10, 2024, Penterra Pharmaceuticals Corp. (Nasdaq: PPCA), a Delaware corporation headquartered in Princeton, New Jersey, entered into the SPA to acquire 100% of the outstanding capital stock of Veridian Biosciences, Inc., a privately held Delaware corporation based in Cambridge, Massachusetts, for aggregate cash consideration of $900,000,000, subject to customary adjustments f

III. Relevant SPA Provisions We set forth below the SPA provisions most directly relevant to the analysis of the impact of the partial clinical hold on Penterra's closing conditions and termination rights. A. Section 7.2 — Conditions to Buyer's Obligations to Close

Article VII of the SPA sets forth the conditions precedent to the obligations of the respective parties to consummate the closing. Section 7.2 specifically addresses the conditions that must be satisfied (or waived by the Buyer) for Penterra to be obligated to close the Transaction. Unless and until all conditions set forth in Section 7.2 are satisfied or waived, Penterra is under no obligation to consummate the acqu

1. Section 7.2(a) — Bring-Down of Representations and Warranties

Section 7.2(a) of the SPA provides, in relevant part: "The representations and warranties of the Sellers set forth in Article III of this Agreement shall be true and correct (without giving effect to any qualifications as to 'materiality' or 'material adverse effect' contained therein, except where a representation or warranty is qualified by 'material adverse effect' in the definition of the applicable representatio

2. Section 7.2(b) — No Material Adverse Effect

Section 7.2(b) of the SPA provides: "Since the date of this Agreement, there shall not have occurred any Material Adverse Effect." This is a standalone closing condition, separate and distinct from the bring-down of representations under § 7.2(a). Even if the bring-down condition were satisfied (or its failure waived), the no-MAE condition independently requires the absence of any MAE since the date of the SPA (June

3. Section 7.2(c) — Compliance with Covenants

Section 7.2(c) of the SPA provides: "The Company shall have complied in all material respects with its covenants and obligations under this Agreement required to be performed by the Company at or prior to the Closing." The covenants most directly relevant to the present circumstances include the operating covenants set forth in SPA § 5.1, which require the Company to conduct its business in the ordinary course consis

Section 8.1 of the SPA sets forth the circumstances under which either party may terminate the SPA prior to closing. The termination provision most relevant to the present circumstances is Section 8.1(d), which provides: "This Agreement may be terminated by Buyer by written notice to the Company and the Stockholder Representative if any of the conditions set forth in Section 7.2 shall have become incapable of being s

IV. Analysis: Impact of the Partial Clinical Hold on Section 7.2(a) — Bring-Down of Representations The bring-down condition under SPA § 7.2(a) requires that the Sellers' representations and warranties set forth in Article III of the SPA be true and correct as of the Closing Date as though remade on such date. As detailed below, we believe the partial clinical hold and the underlying Marlowe Asset Management-2 clinic

V. Analysis: Impact of the Partial Clinical Hold on Section 7.2(b) — No Material Adverse Effect Condition A. Framework for Material Adverse Effect Analysis The condition set forth in SPA § 7.2(b) requires that no Material Adverse Effect shall have occurred since the date of the SPA (June 10, 2024). The MAE analysis under the SPA is governed by Delaware law, as specified in SPA § 10.6. Delaware case law has establishe

VI. Analysis: Impact on Section 7.2(c) — Covenant Compliance A. Operating Covenants Under Section 5.1 SPA § 5.1 requires Veridian, during the period between signing and closing, to conduct its business in the ordinary course consistent with past practice and to use commercially reasonable efforts to preserve its business organization, relationships, and assets. These operating covenants are designed to ensure that th