Contract analysis

I. Executive Summary The purpose of this memorandum is to evaluate whether Veridian Biosciences, Inc. ("Veridian" or the "Company") can invoke any of the enumerated carveouts to the definition of "Material Adverse Effect" (or "MAE") set forth in Section 1.1 of the Stock Purchase Agreement dated June 10, 2024 (the "SPA") among Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer"), Veridian, the Sellers named ther

II. Background A. The Transaction On June 10, 2024, Penterra entered into the SPA to acquire 100% of the outstanding capital stock of Veridian for an aggregate purchase price of $900,000,000 in cash, subject to customary adjustments for cash, debt, and working capital (the "Transaction"). The Transaction is structured as a stock purchase in which Penterra will acquire all issued and outstanding shares of Veridian's c

1. Marlowe Asset Management-2 DMC Interim Analysis (August 14, 2024). The independent Data Monitoring Committee ("DMC") for the Marlowe Asset Management-2 trial (ClinicalTrials.gov identifier NCT05837291) — a randomized, open-label, two-arm Phase II clinical trial evaluating VRD-4187 versus investigator's choice standard-of-care chemotherapy in patients with previously treated ES-SCLC, conducted across 42 clinical si

2. Veridian Notification (August 16, 2024). On August 16, 2024, Penterra received written notice from Veridian of the DMC's findings and recommendations pursuant to the Company's reporting obligations under SPA § 5.1(b), which requires Veridian to promptly notify Penterra of any event, development, or condition that would reasonably be expected to have a Material Adverse Effect or that would cause any representation

3. Broadleaf Scientific Consulting Assessment (August 19, 2024). Dr. Raymond Kapoor, M.D., Ph.D., of Broadleaf Scientific Consulting LLC, Penterra's retained independent clinical expert for the Transaction, delivered a supplemental clinical assessment on August 19, 2024, following his review of the DMC's interim analysis summary and available safety data. Dr. Kapoor's assessment confirmed the severity of the safety s

4. FDA Partial Clinical Hold (August 22, 2024). On August 22, 2024, the U.S. Food and Drug Administration ("FDA") imposed a partial clinical hold on VRD-4187 under IND 154832, pursuant to 21 C.F.R. § 312.42(b)(2)(i). The partial clinical hold prohibits the initiation of new clinical studies under the IND and the enrollment of new patients in ongoing studies, while permitting continued treatment of patients currently

5. Veridian Protocol Amendment (August 28, 2024). As of the date of this memorandum, Veridian has implemented Protocol Amendment v4.0 for the Marlowe Asset Management-2 trial, which includes (i) mandatory tocilizumab prophylaxis (8 mg/kg IV) administered within one hour prior to each VRD-4187 infusion for the first three cycles, and (ii) a reduction in the starting dose of VRD-4187 from 1.5 mg/kg to 0.75 mg/kg, with

III. The MAE Definition and Carveout Structure A. Text of the MAE Definition (SPA § 1.1)

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 with all other events, changes, developments, occurrences, conditions, or effects, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial cond

IV. Analysis of Each Carveout We analyze below the applicability of each of the seven enumerated carveouts to the triggering events, including identification of potential arguments that Veridian and its counsel at Zalcourt Archer & Cole LLP may advance and our analysis of why those arguments fail. A. Carveout (i): General Economic or Political Conditions Veridian's potential argument. Veridian might contend that the

V. The Disproportionate Impact Exception — Consolidated Analysis A. Framework As set forth in Part III.C above, even if any of carveouts (i) through (vi) were somehow deemed facially applicable to the triggering events, each is subject to the proviso that the carveout "shall not apply" — and the otherwise-excluded event shall be taken into account in the MAE determination — to the extent the event "disproportionately

1. The safety signal is sui generis to VRD-4187. The 23.4% Grade ≥3 CRS rate, seven treatment-related deaths (3.6% mortality), and non-statistically significant ORR (p = 0.58) are specific to VRD-4187 and the Marlowe Asset Management-2 trial. These data points are not shared by, and do not similarly affect, other biotechnology companies. No comparable bispecific T-cell engager program — including tarlatamab (Greaves

2. The FDA clinical hold is company- and product-specific. The partial clinical hold on IND 154832 applies exclusively to VRD-4187. No other IND in the biotechnology industry received a clinical hold on August 22, 2024, or as a result of the same events. The regulatory action is, by definition, disproportionate because it affects only Veridian and no other company.

3. Concentration of enterprise value in VRD-4187. Veridian is a pre-revenue, clinical-stage company with no marketed products, no meaningful revenue (FY2023 revenue: $0), and a pipeline consisting of three candidates, of which VRD-4187 is the only asset with meaningful clinical data (the other two programs, VRD-5201 and VRD-6003, are in IND-enabling studies and preclinical development, respectively). Penterra's finan

4. No comparator experienced similar adverse effects from the same purported exogenous cause. For the disproportionate impact exception to be meaningful, the adverse effect must be disproportionate relative to the comparator set. Here, no comparably situated biotechnology company experienced a comparable clinical hold, a comparable safety signal, or comparable adverse clinical data at the same time or attributable to

VI. Anticipated Counterarguments by Veridian / Zalcourt Archer & Cole We anticipate that Veridian and its counsel, Rebecca Whitmore at Zalcourt Archer & Cole LLP, may advance the following counterarguments in response to Penterra's position on carveout inapplicability. We address each below. A. Argument: Clinical Trial Risk is Inherent and Industry-Wide The argument. Veridian may argue that clinical trial failure is