Contract analysis

I. Executive Summary You have asked us to analyze the risk that Veridian Biosciences, Inc. ("Veridian" or the "Company") obtains specific performance compelling Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer") to close the $900,000,000 stock purchase transaction contemplated by the Stock Purchase Agreement, dated as of June 10, 2024 (the "SPA"), following Penterra's termination of the SPA on September 30, 2

II. Factual Background A. The Transaction and Key SPA Provisions The SPA was executed on June 10, 2024, and provides for Penterra's acquisition of 100% of the outstanding capital stock of Veridian for an aggregate purchase price of $900,000,000 in cash, subject to customary purchase price adjustments. The transaction was structured as a stock purchase in which Penterra would acquire all issued and outstanding shares

Section 10.12 of the SPA, titled "Specific Performance," provides in relevant part: The parties hereto acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, the parties agree that, prior to the valid termination of this Agreement in accordance with Article VIII, each part

Section 7.1 — Mutual Conditions. Section 7.1 sets forth conditions to both parties' obligation to close, including: (a) antitrust clearance — the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been terminated; and (b) no injunction or legal restraint — no order, injunction, decree, or ruling by any governmental authority of c

Section 7.2 — Buyer's Conditions to Closing. Section 7.2 sets forth conditions to the Buyer's (Penterra's) obligation to close:

Section 7.2(a) — Bring-Down of Sellers' Representations and Warranties. The representations and warranties of the Company and the Stockholder Representative set forth in this Agreement shall be true and correct in all material respects (or, with respect to any representation or warranty that is qualified by "materiality" or "Material Adverse Effect," true and correct in all respects) as of the Closing Date with the s

Section 7.2(b) — No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any event, change, circumstance, occurrence, effect, development, condition, or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company.

Section 7.2(c) — Compliance with Covenants. The Company and the Stockholder Representative shall have complied in all material respects with all covenants and agreements required to be performed or complied with by them under this Agreement at or prior to the Closing.

Section 7.2(d) — Delivery of Seller Closing Deliverables. The Company shall have delivered (or caused to be delivered) to the Buyer each of the items required to be delivered by the Company at the Closing pursuant to Section 2.3, including without limitation: (i) an officer's certificate, signed by the Chief Executive Officer and Chief Financial Officer of the Company, certifying as to the satisfaction of the conditi

Section 7.3 — Sellers' Conditions to Closing. Section 7.3 sets forth conditions to the Sellers' obligation to close, including: (a) the Buyer's representations and warranties shall be true and correct in all material respects as of the Closing Date; (b) the Buyer shall have complied in all material respects with all covenants required to be performed at or prior to the Closing; (c) the Buyer shall have delivered the

Article VIII of the SPA sets forth the circumstances under which the SPA may be terminated prior to closing. The termination provisions relevant to the present dispute include:

Section 8.1(a) — Mutual Written Consent. The SPA may be terminated by the mutual written consent of the Buyer and the Stockholder Representative.

Section 8.1(b) — Outside Date Termination. The SPA may be terminated by either the Buyer or the Stockholder Representative if the Closing shall not have occurred on or prior to December 10, 2024 (the "Outside Date"); provided, however, that the right to terminate under this Section 8.1(b) shall not be available to any party whose breach of any representation, warranty, covenant, or agreement set forth in this Agreeme

Section 8.1(d) — Buyer Termination for Failure of Closing Conditions. The Buyer may terminate this Agreement if any of the conditions set forth in Sections 7.1 or 7.2 shall have become incapable of being satisfied prior to the Outside Date; provided, however, that the right to terminate under this Section 8.1(d) shall not be available to the Buyer if the failure of such condition to be satisfied has been primarily ca

III. Legal Framework: Specific Performance Under Delaware Law A. General Principles of Specific Performance in Delaware Specific performance is an equitable remedy that lies within the sound discretion of the Court of Chancery, Delaware's dedicated equity court. As an equitable remedy, specific performance is not available as a matter of right; rather, the court exercises its judgment as to whether, under all the cir

IV. Analysis of Veridian's Likely Specific Performance Claim We now turn to a detailed analysis of each element of Veridian's anticipated specific performance claim, assessing the strengths and weaknesses of Veridian's position and Penterra's available defenses. A. Element 1: Valid and Enforceable Contract The SPA is a comprehensive, heavily negotiated agreement between sophisticated parties represented by experience

1. Financial Capacity to Close. The SPA requires Penterra to pay $900,000,000 in cash at closing. The financing structure contemplated by the SPA consisted of: (a) a $500,000,000 committed senior secured term loan facility arranged with Summit Ridge Capital Partners, with Ironclad Trust Company, N.A. as administrative agent (Commitment Letter Reference: CL-2024-PPCA-0607), and (b) $400,000,000 from Penterra's cash on

2. Practicality of Compelling a Post-Termination Closing. If the Court were to order specific performance, it would need to compel a complex series of closing actions, including but not limited to: execution and delivery of updated officer's certificates by Veridian's CEO and CFO certifying satisfaction of closing conditions; funding of the $180,000,000 Indemnification Escrow Amount and the $2,500,000 Stockholder Rep

3. Passage of Time and Changed Circumstances. A significant practical challenge to specific performance in this case is the passage of time. The Outside Date under the SPA is December 10, 2024. If Veridian files its complaint on or about November 15, 2024, even under an expedited schedule, the Court of Chancery is unlikely to render a final decision on the merits prior to the Outside Date. Delaware Court of Chancery

1. Clean Hands. The doctrine of clean hands requires that a party seeking equitable relief must come to court without having engaged in inequitable conduct relating to the subject matter of the litigation. Penterra may raise the clean hands defense against Veridian, focusing on two potential areas of concern. First, Penterra may argue that Veridian failed to fully and promptly disclose the Marlowe Asset Management-2

2. Balance of Hardships. The balance of hardships weighs the relative burdens that specific performance would impose on the defendant against the harm to the plaintiff if specific performance is denied. Hardship to Veridian if specific performance is denied. Veridian is a clinical-stage biotechnology company with no product revenue, a FY2023 net loss of $87.3 million, and rapidly depleting cash reserves (approximatel

3. Laches. The doctrine of laches bars equitable relief where the plaintiff has unreasonably delayed in asserting its rights to the prejudice of the defendant. Veridian's demand letter was sent on October 15, 2024, approximately two weeks after Penterra's termination on September 30, 2024, and the complaint is anticipated on or about November 15, 2024, approximately six weeks after termination. Given the complexity o

V. The Central Defense: Validity of the Termination and the MAE A. Penterra's Strongest Defense — Closing Conditions Were Not Satisfied As the foregoing analysis makes clear, the most critical defense available to Penterra against Veridian's specific performance claim is the validity of the termination itself. If Penterra can establish that the closing conditions in SPA §§ 7.2(a) and 7.2(b) were not satisfied — speci