PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, New York 10166
INTERNAL MEMORANDUM
DATE: February 13, 2024
TO: Oliver Mackenzie, Partner, Mergers & Acquisitions
FROM: Office of the General Counsel, Calderwood & Harkness LLP (Prepared by Victoria R. Hartley, Conflicts Counsel)
RE: Conflicts Clearance — Proposed Representation of Penterra Pharmaceuticals Corp. (Proposed Acquisition of Veridian Biosciences, Inc.)
MATTER NUMBER: 1018-00008 (to be assigned upon clearance)
CONFIDENTIALITY NOTICE: This memorandum is confidential and intended solely for the internal use of Calderwood & Harkness LLP. It is protected by attorney-client privilege and the work product doctrine. This memorandum should not be disclosed to any person outside the firm, including the prospective client, without the prior written authorization of the Office of the General Counsel. Unauthorized distribution or copying of this memorandum is strictly prohibited.
1. Purpose and Scope of Conflicts Review
This memorandum documents the results of the firm-wide conflicts of interest review conducted by the Office of the General Counsel in connection with the proposed engagement of Calderwood & Harkness LLP ("the Firm" or "C&H") to represent Penterra Pharmaceuticals Corp. ("Penterra" or "PPC") in a potential acquisition of Veridian Biosciences, Inc. ("Veridian" or "VBI"). The review was conducted pursuant to the Firm's Conflicts Clearance Policies and Procedures Manual (revised January 2024) and in accordance with the New York Rules of Professional Conduct ("NYRPC"), including but not limited to Rules 1.7 (Current Client Conflicts), 1.8 (Specific Rules Regarding Current Clients), 1.9 (Duties to Former Clients), 1.10 (Imputation of Conflicts), and 1.18 (Duties to Prospective Clients).
The conflicts review was requested on February 12, 2024, by Oliver Mackenzie, Partner in the Firm's Mergers & Acquisitions Practice Group, who would serve as the Responsible Partner for the proposed engagement. Mr. Mackenzie's request followed the authorization by Penterra's Board of Directors to explore, and potentially consummate, the acquisition of 100% of the outstanding capital stock of Veridian Biosciences, Inc. Mr. Mackenzie indicated that Penterra's General Counsel, Thomas F. Holbrook, contacted the Firm on February 12, 2024, to discuss the potential engagement and provide preliminary information about the contemplated transaction and its participants.
Prospective Client. The prospective client is Penterra Pharmaceuticals Corp., a corporation organized under the laws of the State of Delaware, publicly traded on the Nasdaq Stock Market under the ticker symbol "PPCA," with its principal executive offices located at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540. Penterra is a specialty pharmaceutical company focused on the development and commercialization of therapeutics in the areas of oncology, immunology, and rare diseases.
Target Company. The target of the proposed acquisition is Veridian Biosciences, Inc., a corporation organized under the laws of the State of Delaware, which is privately held and not publicly traded. Veridian's principal offices are located at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian is a clinical-stage biotechnology company focused on immuno-oncology therapeutics.
Scope of Proposed Representation. The proposed engagement encompasses all aspects of the contemplated acquisition transaction, including but not limited to: (a) the conduct of legal due diligence on Veridian and its business, intellectual property portfolio, regulatory compliance, material contracts, litigation exposure, and employee matters; (b) the negotiation, drafting, and finalization of the definitive stock purchase agreement and all ancillary transaction documents (including, without limitation, escrow agreements, stockholder representative agreements, non-competition agreements, transition services agreements, employment and retention agreements, and any other documents reasonably necessary to effect the transaction); (c) the preparation and filing of all required regulatory filings, including but not limited to filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (d) coordination with Penterra's financial advisors and financing sources in connection with the financing of the acquisition; and (e) any pre-closing or post-closing matters, including potential indemnification claims, purchase price adjustment disputes, earnout disputes, or other disputes that may arise out of or in connection with the transaction.
Proposed Engagement Team. The engagement team for this matter is proposed to consist of the following attorneys:
Additional attorneys may be added to the engagement team as the scope of the matter develops, including but not limited to attorneys in the Firm's intellectual Property, Employee Benefits & Executive Compensation, Real Estate, Environmental, and Litigation practice groups. Any additions to the engagement team will be subject to the standard individual conflicts check process.
2. Parties and Related Entities Searched
The following section identifies all parties, related entities, and key individuals included in the conflicts search. The information set forth below was provided by Oliver Mackenzie and derived from preliminary materials furnished by Penterra's General Counsel, Thomas F. Holbrook, and from publicly available sources. Where applicable, Employer Identification Numbers ("EINs"), registered agents, and other identifying information have been included to enhance the accuracy and completeness of the search.
2.1 Prospective Client (Buyer)
Penterra Pharmaceuticals Corp.
• Jurisdiction of Organization: Delaware
• Stock Exchange / Ticker: Nasdaq — PPCA
• EIN: 22-3847561
• Principal Office: 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540
• Registered Agent: Capitol Corporate Services, Inc., 1675 South Ashbury Asset Advisors, Suite B, Dover, DE 19901
• Independent Auditor: Tarrant & Co., 550 South Tryon Street, Suite 1400, Charlotte, NC 28202 (Engagement Partner: Diana Rourke)
• Transfer Agent: Pinnacle Transfer Services, Inc., 6201 15th Avenue, Brooklyn, NY 11219
The following key individuals affiliated with Penterra were included in the conflicts search:
2.2 Target Company (Seller)
Veridian Biosciences, Inc.
• Jurisdiction of Organization: Delaware
• Publicly Traded: No (privately held)
• EIN: 84-2193047
• Principal Office: 550 Gateway Drive, Cambridge, MA 02142
• Registered Agent: Tidewater Registered Agents LLC, 838 Walker Road, Suite 21-2, Dover, DE 19904
• Independent Auditor: Northbridge Accounting Group LLP, 125 High Street, Suite 3100, Boston, MA 02110 (Engagement Partner: Patrick Calloway)
Veridian was founded in 2016 and is a clinical-stage biotechnology company focused on the development of immuno-oncology therapeutics. Veridian has no product revenue and reported a net loss of approximately ($87.3 million) for fiscal year 2023. Veridian employs approximately 148 persons across operations in Massachusetts, California, and Maryland. The following key individuals affiliated with Veridian were included in the conflicts search:
2.3 Major Stockholders of Veridian
The following major stockholders of Veridian were identified and included in the conflicts search. Veridian's capitalization table was provided in preliminary form by Penterra's General Counsel based on information furnished during initial discussions between the parties.
Crestline Ventures, LP
• Jurisdiction of Organization: Delaware (limited partnership)
• EIN: 83-1567842
• Role: Lead investor in Veridian's Series A and Series B preferred stock financing rounds
• Fully Diluted Equity Interest in Veridian: Approximately 28.3%
• Key Individual Searched: David Ng, Managing Partner
• Note: Crestline Ventures is expected to serve as the Stockholder Representative under the definitive stock purchase agreement, and as such will be the principal counterparty to Penterra on post-closing indemnification, purchase price adjustment, and earnout matters.
Boreal Health Partners Fund III, LP
• Jurisdiction of Organization: Delaware (limited partnership)
• Role: Lead investor in Veridian's Series C preferred stock financing round
• Fully Diluted Equity Interest in Veridian: Approximately 19.7%
• Key Individual Searched: Sarah Dalmqvist, Managing Director
Apex Growth Equity Fund II, LP
• Jurisdiction of Organization: Delaware (limited partnership)
• Role: Lead investor in Veridian's Series D preferred stock financing round
• Fully Diluted Equity Interest in Veridian: Approximately 14.1%
• Key Individual Searched: Marcus Doyle, Partner
Founders and Management
• Dr. Julian Marek (Co-Founder & CEO): Approximately 8.4% fully diluted equity
• Dr. Priya Chandrasekaran (Co-Founder & CSO): Approximately 6.2% fully diluted equity
• Other management and employees (through the Employee Stock Option Plan pool): Approximately 9.8% fully diluted equity
Remaining Institutional Investors
Approximately 13.5% of Veridian's fully diluted equity is held collectively by other institutional investors whose identities have not yet been disclosed. Supplemental conflicts searches will be conducted as additional stockholder information becomes available during the due diligence process.
2.4 Known or Anticipated Adverse and Co-Counsel / Counterparty Firms
Zalcourt Archer & Cole LLP — Anticipated outside counsel to Veridian and the selling stockholders in connection with the proposed transaction.
• Address: One Federal Street, 30th Floor, Boston, MA 02110
• Lead Partner (M&A): Rebecca Whitmore
• Associate: Jonathan Pratt
• Tax Partner: Elaine Sato
Ridgeway Partners LLC — Veridian's financial advisor and investment bank engaged to run the sale process.
• Address: 101 Huntington Avenue, Suite 2500, Boston, MA 02199
• Lead Banker (Managing Director): Laura Beckett
2.5 Anticipated Transaction Counterparties and Advisors (Buyer-Side)
The following parties have been identified as anticipated advisors and counterparties aligned with the prospective client (Penterra) in connection with the proposed transaction:
Garrison Zanthor & Co., LLC — Penterra's financial advisor.
• Address: 383 Madison Avenue, New York, NY 10179
• Lead Banker (Managing Director): Kevin Driscoll
Broadleaf Scientific Consulting LLC — Anticipated clinical and scientific due diligence advisor retained by Penterra.
• Address: 225 Franklin Street, Suite 1900, Boston, MA 02110
• Lead Consultant: Dr. Raymond Kapoor
Stonebridge HSW Antitrust Advisors LLP — Anticipated antitrust counsel to Penterra for HSR and related regulatory matters.
• Address: 1440 New York Avenue NW, Suite 700, Washington, DC 20005
• Lead Partner: Martin Prumvane
Financing Sources, Escrow Agents, and Insurance Carriers. At the time of this initial conflicts search, the specific financing sources (lenders, administrative agents), escrow agents, and representations and warranty insurance carriers associated with the proposed transaction have not yet been identified. Supplemental conflicts searches will be promptly conducted upon identification of these parties. Mr. Mackenzie has indicated that these counterparties will likely be identified within the next two to three weeks as the transaction structure is finalized.
3. Conflicts Database Search Results
3.1 Search Methodology
The conflicts search was conducted on February 12–13, 2024, using the Firm's electronic conflicts management system (Greaves Services Inc. version 6.2), supplemented by manual inquiries and direct outreach to the Firm's practice group leaders and partners.
Electronic Search Parameters. The electronic searches employed the following search terms and parameters:
(a) All entity names, in both full and abbreviated form (e.g., "Penterra Pharmaceuticals Corp.," "Penterra," "PPC," "PPCA," "Veridian Biosciences, Inc.," "Veridian," "VBI," "Crestline Ventures," "Boreal Health Partners," "Apex Growth Equity," and all other entity names identified in Section 2 above);
(b) All known individual names (e.g., "Rajagopal," "Anand Rajagopal," "Burgess," "Catherine Burgess," "Marek," "Julian Marek," and all other individual names identified in Section 2 above), including variant spellings, name permutations, and maiden or former names where known;
(c) All known Employer Identification Numbers (EINs), including 22-3847561 (Penterra) and 84-2193047 (Veridian);
(d) All known ticker symbols (Nasdaq: PPCA);
(e) All known affiliated entities, subsidiaries, registered agents, auditors, transfer agents, and advisory firms identified in Section 2 above.
Scope of Search. The electronic search covered the following categories of records:
(a) All current open matters across all Firm offices and practice groups;
(b) All closed matters within the prior five (5) years (i.e., matters closed on or after February 13, 2019);
(c) The Firm's general relationship database, which includes records of prospective client consultations, declined engagements, lateral hire relationship disclosures, and informal relationship entries; and
(d) The Firm's financial and investment disclosure database, to identify any personal financial interests held by Firm attorneys or staff in any of the searched entities.
Manual Inquiries. In addition to the electronic search, on February 12, 2024, the Office of the General Counsel circulated a conflicts clearance notification to all practice group leaders, equity partners, income partners, and of counsel attorneys via the Firm's internal conflicts clearance notification system. The notification identified the prospective client, the target, the major stockholders, and all other known parties and individuals, and requested that any attorney with knowledge of a potential conflict, prior relationship, or other relevant information respond by close of business on February 13, 2024. As of the preparation of this memorandum, all responses have been received and reviewed, and the results are incorporated into the analysis below.
3.2 Results — Penterra Pharmaceuticals Corp. (Prospective Client)
The Firm has not previously represented Penterra Pharmaceuticals Corp. in any capacity, whether as transactional counsel, litigation counsel, regulatory counsel, or in any other advisory role. No prior engagements involving Penterra or any of its known affiliates, subsidiaries, or predecessors were identified in the Firm's conflicts management system or general relationship database.
No partner, of counsel, associate, or other attorney at the Firm reported any prior professional or personal relationship with Penterra or any of its identified officers and directors (including Dr. Anand Rajagopal, Catherine M. Burgess, Thomas F. Holbrook, Natalie Reiner, and Margaret Liu Whitfield).
No adverse representations against Penterra were identified. Specifically, the Firm has not represented any party in litigation, arbitration, regulatory proceedings, or transactional matters adverse to Penterra at any time during the period covered by the search.
This would be a new client relationship for the Firm. The standard new client intake procedures, including know-your-client, anti-money laundering, and engagement letter requirements, will be completed in connection with the opening of this matter.
3.3 Results — Veridian Biosciences, Inc. (Target / Adverse Party)
The Firm has not previously represented Veridian Biosciences, Inc. in any capacity. No prior engagements involving Veridian or any of its known affiliates, subsidiaries, or predecessors were identified in the Firm's conflicts management system or general relationship database. No current or recent representation of Veridian was found in any search category.
No partner, of counsel, associate, or other attorney at the Firm reported any prior professional or personal relationship with Veridian or any of its identified officers and directors (including Dr. Julian Marek, Dr. Priya Chandrasekaran, Steven R. Kessler, Dr. Anne-Marie Fontaine, and Rachel Stein-Goldberg).
In the proposed transaction, the Firm will be adverse to Veridian as counsel to Penterra (the buyer), since Penterra and Veridian will be on opposite sides of the stock purchase agreement. However, given the absence of any prior or current attorney-client relationship between the Firm and Veridian, no conflict of interest arises from this adverse posture.
3.4 Results — Crestline Ventures, LP
No current or prior representation of Crestline Ventures, LP, its general partner, or its Managing Partner, David Ng, was identified in the Firm's conflicts management system or general relationship database. The Firm has had no attorney-client relationship with Crestline Ventures at any time during the period covered by the search.
In the proposed transaction, Crestline Ventures will be on the opposite side of the transaction as Veridian's largest stockholder, holding approximately 28.3% of Veridian's fully diluted equity. Crestline is expected to serve as the Stockholder Representative under the definitive stock purchase agreement and will therefore be the principal counterparty to Penterra on post-closing matters including indemnification claims, purchase price adjustments, and earnout calculations. Notwithstanding Crestline's significant role as an adverse party, no conflict of interest is identified because no attorney-client relationship exists or has previously existed between the Firm and Crestline Ventures.
3.5 Results — Boreal Health Partners Fund III, LP
No current or prior representation of Boreal Health Partners Fund III, LP, its general partner, its management company, or its Managing Director, Sarah Dalmqvist, was identified in the Firm's conflicts management system or general relationship database. The Firm has had no attorney-client relationship with Boreal Health Partners at any time during the period covered by the search.
Boreal Health Partners Fund III will be on the opposite side of the transaction as Veridian's second-largest institutional stockholder, holding approximately 19.7% of Veridian's fully diluted equity. No conflict of interest is identified.
3.6 Results — Apex Growth Equity Fund II, LP
No current or prior representation of Apex Growth Equity Fund II, LP, its general partner, its management company, or its Partner, Marcus Doyle, was identified in the Firm's conflicts management system or general relationship database. The Firm has had no attorney-client relationship with Apex Growth Equity at any time during the period covered by the search.
Apex Growth Equity Fund II will be on the opposite side of the transaction as Veridian's third-largest institutional stockholder, holding approximately 14.1% of Veridian's fully diluted equity. No conflict of interest is identified.
3.7 Results — Zalcourt Archer & Cole LLP (Opposing Counsel)
The Firm's conflicts database reflects that Zalcourt Archer & Cole LLP has appeared as opposing counsel in a number of unrelated transactional and litigation matters over the course of the Firm's history. This is unremarkable given that both firms are prominent participants in the M&A and general corporate practice areas. A review of all currently open matters and matters closed within the prior five years confirmed that no current matter creates a conflict or otherwise impairs the Firm's ability to represent Penterra in a transaction in which Zalcourt Archer & Cole LLP serves as counsel to the opposing parties.
Zalcourt Archer & Cole LLP is not a client of the Firm. No attorney-client relationship exists between the Firm and Zalcourt Archer & Cole LLP. Zalcourt Archer & Cole LLP is anticipated to serve as opposing counsel to Veridian and the selling stockholders in the proposed transaction. The Firm may freely and without limitation advocate on behalf of Penterra adversely to parties represented by Zalcourt Archer & Cole LLP.
No ethical conflict is identified with respect to Zalcourt Archer & Cole LLP.
3.8 Results — Ridgeway Partners LLC (Target's Financial Advisor)
No current or prior representation of Ridgeway Partners LLC or its Managing Director, Laura Beckett, was identified in the Firm's conflicts management system or general relationship database. The Firm has had no attorney-client relationship with Ridgeway Partners at any time during the period covered by the search.
Ridgeway Partners LLC is the target's financial advisor and conducted the sale process on behalf of Veridian and its stockholders. While Ridgeway Partners is not a direct adverse party in the transaction, it is aligned with the interests of the sellers and may participate in negotiations and due diligence coordination. No conflict of interest is identified.
3.9 Results — Garrison Zanthor & Co., LLC (Buyer's Financial Advisor)
No current representation of Garrison Zanthor & Co., LLC was identified in the Firm's conflicts management system that would create any conflict or impair the Firm's ability to serve as counsel to Penterra in this matter. Garrison Zanthor & Co. is aligned with the prospective client (Penterra) as the buyer's financial advisor in the proposed transaction. There is no adversity between the Firm's prospective client and Garrison Zanthor, and accordingly no conflict analysis under the Rules of Professional Conduct is implicated.
No conflict is identified.
3.10 Results — Other Searched Entities
The following additional entities were searched in the Firm's conflicts management system and general relationship database, with the results indicated:
No conflicts of interest were identified with respect to any of the above entities.
4. Analysis of Potential Conflicts
Based on the results of the conflicts search described in Section 3 above, the Office of the General Counsel has analyzed the proposed representation under each applicable provision of the New York Rules of Professional Conduct. The analysis is set forth below.
4.1 Direct Adverse Conflicts (NYRPC Rule 1.7(a)(1))
Rule 1.7(a)(1) of the New York Rules of Professional Conduct provides that a lawyer shall not represent a client if the representation will be directly adverse to another client, unless certain conditions permitting informed consent are satisfied. The purpose of this rule is to prevent a lawyer from being in the untenable position of simultaneously owing duties of loyalty and zealous advocacy to two clients whose interests are in direct opposition.
In the proposed transaction, Penterra (the prospective client) will be directly adverse to Veridian (the target company) and Veridian's stockholders, including Crestline Ventures, LP, Boreal Health Partners Fund III, LP, Apex Growth Equity Fund II, LP, and the individual founders and management holders. The buyer and the sellers will negotiate opposing positions on purchase price, representations and warranties, indemnification obligations, escrow terms, earnout provisions, non-competition covenants, and numerous other material deal terms.
However, the Firm has no current attorney-client relationship with Veridian, any of its stockholders (Crestline, Boreal, Apex, or any individual founder or management holder), or any of their respective affiliates, counsel, or advisors. No current client of the Firm has been identified on the sell side of the proposed transaction.
Conclusion: No conflict under Rule 1.7(a)(1) exists. The Firm does not currently represent any party that is directly adverse to Penterra in this transaction or otherwise.
4.2 Material Limitation Conflicts (NYRPC Rule 1.7(a)(2))
Rule 1.7(a)(2) of the New York Rules of Professional Conduct provides that a lawyer shall not represent a client if there is a significant risk that the lawyer's professional judgment on behalf of the client will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person, or by the lawyer's own interests. This rule requires an assessment of whether any external relationships, financial interests, business obligations, or personal connections could compromise the Firm's ability to exercise independent professional judgment and provide undivided loyalty to the prospective client.
The conflicts review has not identified any relationships, financial interests, business obligations, or other circumstances that would materially limit the Firm's ability to represent Penterra. No partner, of counsel, associate, or other attorney at the Firm reported any personal, familial, social, or financial relationship with any of the sell-side parties, their officers, directors, key personnel, counsel, or advisors. No Firm attorney has identified any business relationship or prior professional interaction with any sell-side party that could create even an appearance of divided loyalty.
Furthermore, no circumstances have been identified in which the Firm's responsibilities to any other current client would be materially limited by the proposed representation of Penterra, or vice versa.
Conclusion: No material limitation conflict under Rule 1.7(a)(2) has been identified. There is no significant risk that the Firm's professional judgment on behalf of Penterra would be materially limited by responsibilities to another client, a former client, a third person, or by the Firm's own interests.
4.3 Former Client Conflicts (NYRPC Rule 1.9)
Rule 1.9 of the New York Rules of Professional Conduct restricts a lawyer's ability to represent a client in a matter that is the same or substantially related to a prior representation of a former client, where the new client's interests are materially adverse to those of the former client, absent informed consent. The rule protects the confidential information of former clients and prevents the misuse of information obtained during prior representations.
The conflicts search has confirmed that the Firm has no former client relationship with Veridian, Crestline Ventures, Boreal Health Partners Fund III, Apex Growth Equity Fund II, or any of their respective officers, directors, key personnel, affiliates, or predecessors. The Firm has never represented any sell-side party in any capacity, whether in a matter related to this transaction or in any other matter whatsoever.
Accordingly, there are no former client confidences at risk, and no former client loyalty obligations are implicated.
Conclusion: No conflict under Rule 1.9 exists. The Firm has no former client relationship with any party adverse to Penterra in this transaction.
4.4 Prospective Client Conflicts (NYRPC Rule 1.18)
Rule 1.18 of the New York Rules of Professional Conduct addresses the duties owed to prospective clients — that is, persons who consult with a lawyer about the possibility of forming an attorney-client relationship. Under Rule 1.18, if a lawyer receives information from a prospective client that could be significantly harmful to that person if disclosed, the lawyer may be precluded from representing a different client with interests materially adverse to the prospective client in the same or a substantially related matter.
The Office of the General Counsel has confirmed, through the conflicts search and the manual inquiry process, that no attorney at Calderwood & Harkness was consulted by Veridian, any of its stockholders, their counsel, or their advisors regarding this potential transaction or any substantially related matter. No prospective client discussions took place between any Firm attorney and any sell-side party.
Conclusion: No conflict under Rule 1.18 exists. No sell-side party consulted with any Firm attorney in a manner that would trigger prospective client duties.
4.5 Business Transaction / Financial Interest Conflicts (NYRPC Rule 1.8)
Rule 1.8 of the New York Rules of Professional Conduct addresses conflicts arising from specific categories of transactions and relationships, including business transactions with clients, financial interests adverse to clients, and related matters.
The conflicts search, including a review of the Firm's financial and investment disclosure database, has confirmed that no Firm partner, of counsel, associate, or staff member holds any equity interest in Penterra Pharmaceuticals Corp. (Nasdaq: PPCA) or Veridian Biosciences, Inc. No Firm personnel holds any known personal investment in Crestline Ventures, LP, Boreal Health Partners Fund III, LP, Apex Growth Equity Fund II, LP, or any of their respective management companies or affiliated funds.
As a standard precautionary measure, all members of the proposed engagement team and any Firm personnel who become aware of this matter are reminded of the following obligations:
(a) Each engagement team member must affirmatively confirm that he or she does not hold any personal investment in Penterra (Nasdaq: PPCA) or any related entity, including Veridian, any of its stockholders, or any other transaction counterparty;
(b) No engagement team member or Firm personnel with knowledge of this matter may purchase, sell, or otherwise trade in securities of Penterra (Nasdaq: PPCA) during the pendency of the engagement, in accordance with the Firm's Insider Trading and Personal Investment Policy (revised September 2023); and
(c) Any Firm personnel who subsequently acquires knowledge of a personal financial interest in any transaction party must promptly notify the Office of the General Counsel.
Conclusion: No conflict under Rule 1.8 has been identified. No Firm attorney or staff member holds any financial interest that is adverse to Penterra or that could compromise the Firm's independence in this matter.
5. Additional Considerations
5.1 Subsequent Conflicts Re-Check Obligations
At the time of this initial conflicts search, certain transaction counterparties have not yet been fully identified, and therefore could not be included in the search. The Office of the General Counsel notes the following categories of parties that will require supplemental conflicts searches upon identification:
(a) Financing Sources. Penterra may obtain committed debt financing or other acquisition financing in connection with the proposed transaction. The identity of lending institutions, administrative agents, and other financing parties has not yet been determined.
(b) Representations and Warranty Insurance Carriers and Brokers. The transaction may involve the procurement of a representations and warranty insurance policy, and the identity of the insurance carrier and broker has not yet been determined.
(c) Escrow Agents. The definitive transaction documents will likely provide for an escrow arrangement, and the escrow agent has not yet been identified.
(d) Additional Selling Stockholders. Approximately 13.5% of Veridian's fully diluted equity is held by institutional investors whose identities have not yet been disclosed. As additional stockholder information becomes available during due diligence, supplemental searches will be conducted.
It is noted that Mr. Mackenzie has subsequently indicated that the following parties may be identified in connection with the transaction, and the Office of the General Counsel will conduct supplemental searches upon confirmation of their involvement:
• Summit Ridge Capital Partners, LP (potential financing source)
• Ironclad Trust Company, N.A. (potential administrative agent or lender)
• Atlas Indemnity Insurance Co. (potential R&W insurance carrier)
• Prescott Whitfield Insurance Brokers, Inc. (potential R&W insurance broker)
• Fidelis National Escrow Corp. (potential escrow agent)
The Responsible Partner is requested to notify the Office of the General Counsel promptly upon confirmation of the involvement of these or any other additional transaction counterparties, so that supplemental conflicts searches may be timely conducted.
In the event that the matter progresses to litigation, arbitration, or any form of dispute resolution (including post-closing indemnification claims, purchase price adjustment disputes, or earnout disputes), additional adverse-party searches should be conducted to confirm the absence of conflicts with respect to any new adverse parties, witnesses, or other participants.
5.2 Information Barriers / Ethical Walls
Based on the results of the conflicts review set forth in this memorandum, no information barriers, ethical walls, or screening mechanisms are required at this time. The conflicts review has identified no relationships, representations, or circumstances that would necessitate the implementation of such measures.
In the event that any subsequent conflicts search or development in the matter reveals a potential conflict requiring the implementation of an information barrier or ethical wall, the Office of the General Counsel will promptly assess the situation and implement appropriate measures in accordance with the Firm's Ethical Wall Policy (revised March 2023) and the applicable provisions of the New York Rules of Professional Conduct, including Rule 1.10 (Imputation of Conflicts).
5.3 Insider Trading and Confidentiality Reminders
Penterra Pharmaceuticals Corp. is a publicly traded company listed on the Nasdaq Stock Market under the ticker symbol "PPCA." The proposed acquisition of Veridian Biosciences, Inc. constitutes material nonpublic information ("MNPI") within the meaning of the federal securities laws, including Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder.
All members of the engagement team and all other Firm personnel who become aware of the existence or terms of the proposed transaction are subject to the following obligations:
(a) No Trading. No trading in securities of Penterra Pharmaceuticals Corp. (Nasdaq: PPCA), including common stock, options, or any other derivative securities, is permitted from the date of the Firm's engagement through the earlier of (i) public disclosure of the transaction and (ii) termination of the matter. This prohibition extends to direct and indirect trading, including trading through family members' accounts, trusts, partnerships, or other vehicles.
(b) No Tipping. No Firm personnel may communicate the existence or terms of the proposed transaction to any person who is not authorized to receive such information, including family members, friends, personal financial advisors, or other persons outside the Firm. The prohibition against tipping applies regardless of whether the Firm personnel receiving the MNPI is a member of the engagement team or became aware of the information through other means.
(c) Confidentiality. The existence and terms of the proposed transaction must be treated as strictly confidential in accordance with the Firm's Confidentiality Policy and the terms of any confidentiality or non-disclosure agreement entered into by Penterra in connection with the transaction. All documents, communications, and work product related to this matter must be maintained in secure files and should not be discussed in public spaces or through unsecured communication channels.
(d) Code Name. The engagement team should adopt a code name for the transaction for use in internal and external communications to reduce the risk of inadvertent disclosure. The Office of the General Counsel recommends that Mr. Mackenzie coordinate with Penterra's General Counsel and the financial advisors to adopt a mutually agreed code name.
These obligations are ongoing and remain in effect for the duration of the engagement. Any questions regarding the application of these obligations should be directed to the Office of the General Counsel.
6. Conclusion and Clearance Determination
Based on the comprehensive conflicts search conducted on February 12–13, 2024, using the Firm's electronic conflicts management system and supplemented by manual inquiries to all practice group leaders and partners, no conflicts of interest have been identified that would preclude, restrict, or limit Calderwood & Harkness LLP from representing Penterra Pharmaceuticals Corp. in connection with the proposed acquisition of 100% of the outstanding capital stock of Veridian Biosciences, Inc.
Specifically, the conflicts review has confirmed that:
(a) The Firm has no current or former attorney-client relationship with any party that is adverse or potentially adverse to Penterra in this transaction, including Veridian Biosciences, Inc., Crestline Ventures, LP, Boreal Health Partners Fund III, LP, Apex Growth Equity Fund II, LP, or any of their respective affiliates, officers, directors, counsel, or advisors;
(b) No material limitation on the Firm's ability to represent Penterra has been identified, whether arising from responsibilities to other clients, former clients, third parties, or the Firm's own interests;
(c) No prospective client consultation with any sell-side party has occurred;
(d) No Firm personnel holds any financial interest in any transaction party that could compromise the Firm's independence; and
(e) No information barrier or ethical wall is required at this time.
Accordingly, the proposed engagement is cleared for purposes of the Firm's Conflicts Clearance Policies and Procedures and the applicable New York Rules of Professional Conduct.
Matter Number 1018-00008 may be opened, with Oliver Mackenzie designated as Responsible Partner and Harrison Wexford designated as Billing Partner. Standard new client intake procedures, including engagement letter preparation, know-your-client verification, and fee arrangement documentation, should be completed prior to the commencement of substantive legal work.
Supplemental conflicts searches must be conducted upon identification of additional transaction parties, including financing sources, escrow agents, insurance carriers, and any additional selling stockholders. In the event the matter expands to include litigation, arbitration, or other dispute resolution proceedings, additional adverse-party searches should be conducted at that time.
7. Approval and Sign-Off
CONFLICTS CLEARANCE — APPROVAL
Clearance granted — February 13, 2024