Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the available courses of action for Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer") following two significant adverse developments affecting Veridian Biosciences, Inc. ("Veridian" or the "Company"): (a) the adverse interim data readout from the Marlowe Asset Management-2 Phase II clinical trial on August 14, 2024, which revealed a severe saf

II. Background and Current Status A. Transaction Overview On June 10, 2024, Penterra Pharmaceuticals Corp. and Veridian Biosciences, Inc. entered into the Stock Purchase Agreement pursuant to which Penterra agreed to acquire 100% of the outstanding capital stock of Veridian, a Delaware corporation with its principal place of business at 550 Gateway Drive, Cambridge, Massachusetts 02142. The aggregate purchase price u

III. Option A: Proceed to Closing on Existing Terms A. Description Under Option A, Penterra would proceed to close the acquisition of Veridian for $900,000,000 in cash as originally contemplated by the SPA, notwithstanding the adverse Marlowe Asset Management-2 clinical data and the FDA's partial clinical hold on VRD-4187. The closing would take place on the terms and subject to the conditions set forth in the SPA, w

IV. Option B: Negotiate Purchase Price Reduction A. Description Under Option B, Penterra would approach Veridian and the Stockholder Representative, David Ng of Crestline Ventures, LP, to renegotiate a reduced purchase price that reflects the diminished value of VRD-4187 and, by extension, Veridian as an enterprise. The objective would be to reach an amended SPA that permits Penterra to acquire Veridian at a price th

V. Option C: Terminate the SPA Under Section 8.1(d) A. Legal Basis for Termination

Section 8.1(d) of the SPA provides that the Buyer may terminate the Agreement by written notice to the Sellers and the Stockholder Representative if any condition to the Buyer's obligation to close under Article VII of the Agreement has not been satisfied and is not reasonably capable of being satisfied on or prior to the Outside Date, provided that the Buyer is not then in material breach of the Agreement. The Buyer

Section 7.2(a) — Bring-Down of Representations and Warranties. This condition requires that the representations and warranties of the Sellers set forth in Article III of the SPA shall be true and correct in all respects (subject to any materiality or MAE qualifiers contained therein) as of the date of the Agreement and as of the closing date, as though made at and as of such date (except to the extent any representat

Section 7.2(b) — No Material Adverse Effect. This condition provides that, since the date of the Agreement, there shall not have occurred any event, change, or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), results of operations, properties, assets, or prospects of the Company. The Marlo

VI. Litigation Risk Assessment (If Option C Is Pursued) A. Veridian's Likely Claims If Penterra terminates the SPA, we anticipate that Veridian will commence legal proceedings in the Court of Chancery of the State of Delaware. Based on our analysis of the SPA, the factual record, and Veridian's September 13, 2024 response letter, we anticipate that Veridian will assert the following claims:

1. Breach of Contract Veridian will allege that Penterra breached the SPA by purporting to terminate the Agreement without a valid basis and by failing and refusing to close the acquisition. Veridian will contend that no material adverse effect occurred, that the Buyer's closing conditions under Sections 7.2(a) and 7.2(b) were satisfied (or would have been satisfied by the closing date or the Outside Date), and that

2. Specific Performance This is Veridian's most potent claim. Section 10.12 of the SPA grants the Sellers the right to seek specific performance to compel Buyer to close the acquisition, provided that all conditions to Buyer's obligation to close under Article VII have been satisfied or waived. In a specific performance action, Veridian would seek an order from the Court of Chancery directing Penterra to consummate t

3. Declaratory Judgment In addition to or in the alternative to its claims for breach of contract and specific performance, Veridian may seek a declaratory judgment that (i) Penterra's purported termination of the SPA is invalid, (ii) the SPA remains in full force and effect, and (iii) Penterra is obligated to close the acquisition. A declaratory judgment action could be filed either before or after Penterra delivers

1. Valid Termination Under Section 8.1(d) Penterra's primary defense is that the termination of the SPA was validly exercised pursuant to Section 8.1(d) because the Buyer's closing conditions under Sections 7.2(a) and 7.2(b) have not been satisfied and are not reasonably capable of being satisfied on or prior to the Outside Date. The factual and legal basis for this defense is the occurrence of a material adverse eff

2. Closing Conditions Not Satisfied In support of the primary defense, Penterra will demonstrate that both of the relevant closing conditions have failed:

Section 7.2(a) — Bring-Down of Representations. The Sellers' representations regarding Veridian's business, operations, regulatory status, and compliance with applicable law, as set forth in Article III of the SPA, are no longer true and correct to the MAE-qualified standard as of the anticipated closing date. Specifically, representations regarding the condition and sufficiency of Veridian's assets, the status of Ve

Section 7.2(b) — No Material Adverse Effect. Since the date of the SPA (June 10, 2024), a material adverse effect has occurred on the business, condition (financial or otherwise), results of operations, properties, assets, and prospects of Veridian, as a result of the Marlowe Asset Management-2 clinical data and the FDA partial clinical hold. As detailed in Section V.B, the safety signal is severe and disqualifying f

3. Specific Performance — Conditions Defense With respect to Veridian's specific performance claim, Penterra will assert that specific performance under Section 10.12 is conditioned on the satisfaction of all closing conditions under Article VII. Because Sections 7.2(a) and 7.2(b) are not satisfied — a material adverse effect having occurred — the contractual prerequisite for specific performance has not been met, an

4. Affirmative Defense: Failure to Mitigate To the extent Veridian pursues monetary damages rather than or in addition to specific performance, Penterra will assert that Veridian has failed to mitigate its damages. Under Delaware law, a party seeking contract damages has a duty to take reasonable steps to mitigate the harm resulting from the breach. Penterra will argue that Veridian failed to mitigate by not pursuing