Contract analysis

I. EXECUTIVE SUMMARY The purpose of this memorandum is to analyze whether the interim clinical data from the Marlowe Asset Management-2 Phase II trial of VRD-4187, as reported by the independent Data Monitoring Committee ("DMC") on August 14, 2024, constitutes a "Material Adverse Effect" as that term is defined in Section 1.1 of the Stock Purchase Agreement dated June 10, 2024 (the "SPA") between Penterra Pharmaceuti

II. BACKGROUND A. The Transaction On June 10, 2024, Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer"), a publicly traded pharmaceutical company listed on the NASDAQ Global Select Market (ticker: PTRA), entered into that certain Stock Purchase Agreement (the "SPA") to acquire 100% of the outstanding capital stock of Veridian Biosciences, Inc. ("Veridian" or the "Company") for an aggregate consideration of $90

III. CONTRACTUAL FRAMEWORK: MATERIAL ADVERSE EFFECT DEFINITION A. SPA § 1.1 — Definition of "Material Adverse Effect"

Section 1.1 of the SPA defines "Material Adverse Effect" as follows: "Material Adverse Effect" means any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Selle

IV. DELAWARE LAW FRAMEWORK FOR MAE DETERMINATIONS A. General Principles The interpretation and enforcement of Material Adverse Effect clauses in acquisition agreements is governed by well-developed principles of Delaware law, which controls the SPA pursuant to the governing law provision in SPA § 10.5. Under Delaware law, the buyer bears the burden of proving that a Material Adverse Effect has occurred. This allocati

V. APPLICATION TO THE SPA: PRONG-BY-PRONG ANALYSIS A. Prong (a): Material Adverse Effect on the Business, Results of Operations, Financial Condition, or Assets of the Company The MAE definition in SPA § 1.1 encompasses adverse effects on four distinct categories: (1) the business, (2) the results of operations, (3) the financial condition, and (4) the assets of the Company, taken as a whole. An adverse effect on any

1. Impact on Business Veridian's core business is the discovery, development, and (ultimately) commercialization of immuno-oncology therapeutics leveraging its proprietary VeriTCE platform. VRD-4187 is the Company's lead clinical candidate, its most advanced pipeline asset, and the focus of the vast majority of the Company's research and development efforts and resources. The Marlowe Asset Management-2 trial was the

2. Impact on Results of Operations Veridian has no product revenue (FY2023 revenue: $0). For a clinical-stage biotechnology company that is entirely pre-commercial, "results of operations" are best understood by reference to research and development progress, pipeline advancement milestones, clinical trial outcomes, and the efficiency with which the Company converts its capital into clinical data supporting future re

3. Impact on Financial Condition Veridian's financial condition is inextricably linked to the value of its pipeline and its ability to attract additional capital. As a pre-revenue company, Veridian's financial condition is measured not by income statement metrics but by its balance sheet strength (cash position), its ability to raise additional financing, and the probability-adjusted value of its pipeline assets. The

4. Impact on Assets Veridian's principal assets are: (a) its intellectual property portfolio, including the VeriTCE platform technology and the patent portfolio covering VRD-4187 and related compositions of matter, methods of use, and manufacturing processes; (b) its IND (No. 154832) for VRD-4187; (c) the clinical data generated in the Marlowe Asset Management-1 (Phase I) and Marlowe Asset Management-2 (Phase II) tri

VI. VERIDIAN'S ANTICIPATED COUNTERARGUMENTS In the event that Penterra seeks to invoke the MAE clause and terminate the SPA, Veridian and the Stockholder Representative are likely to raise several counterarguments. We address each anticipated counterargument below, together with our assessment of Penterra's responsive arguments. A. "The Data Is Preliminary / Interim" Veridian will likely argue that the DMC interim an