CALDERWOOD & HARKNESS LLP Attorneys at Law
200 Park Avenue, 42nd Floor New York, New York 10166
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
October 1, 2024
VIA OVERNIGHT COURIER AND EMAIL
Ironclad Trust Company, N.A. 60 Wall Street New York, New York 10005
Attention: Samantha Hwang, Vice President
Re: Notice of Termination of Commitment — Commitment Letter dated June 7, 2024 (Ref. CL-2024-PPCA-0607) — Penterra Pharmaceuticals Corp. / Veridian Biosciences, Inc. Acquisition
Dear Ms. Hwang:
This firm represents Penterra Pharmaceuticals Corp., a Delaware corporation ("Penterra" or the "Borrower"), in connection with the matters described herein. We write in reference to that certain Commitment Letter dated June 7, 2024, bearing reference number CL-2024-PPCA-0607 (together with all exhibits, schedules, annexes, and side letters related thereto, the "Commitment Letter"), among Penterra Pharmaceuticals Corp., as Borrower, Summit Ridge Capital Partners, LP, as Lead Arranger (the "Lead Arranger"), and Ironclad Trust Company, N.A., as Administrative Agent (the "Administrative Agent" and, together with the Lead Arranger, the "Commitment Parties"), which Commitment Letter provided for a senior secured term loan facility in an aggregate principal amount of Five Hundred Million Dollars ($500,000,000) (the "Term Loan Facility"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Commitment Letter.
The purpose of this letter is to provide the Administrative Agent and the Commitment Parties with formal notice of the termination of the Stock Purchase Agreement (as defined below) and, in connection therewith, to request the termination of all commitments outstanding under the Commitment Letter, all as more fully set forth below.
Background — The Stock Purchase Agreement and the Commitment Letter
As the Administrative Agent is aware, on June 10, 2024, Penterra Pharmaceuticals Corp. entered into a Stock Purchase Agreement (as amended, restated, supplemented, or otherwise modified from time to time prior to its termination, the "SPA") among Penterra Pharmaceuticals Corp., as Buyer, Veridian Biosciences, Inc., a Delaware corporation ("Veridian" or the "Company"), the stockholders of Veridian identified on Schedule A thereto (collectively, the "Sellers"), and David Ng, in his capacity as the Stockholder Representative. The SPA contemplated the acquisition by Penterra of one hundred percent (100%) of the issued and outstanding capital stock of Veridian Biosciences, Inc. for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, subject to customary purchase price adjustments for working capital, indebtedness, cash, and transaction expenses (the "Transaction").
The Term Loan Facility under the Commitment Letter was arranged to provide $500,000,000 of the funding necessary for the consummation of the Transaction, with the remaining approximately $400,000,000 of the purchase price to be funded from Penterra's available cash on hand and existing revolving credit facility. The Commitment Letter was structured to be co-terminous with the Outside Date (as defined in Section 8.1(b) of the SPA) of December 10, 2024, and the commitments of the Commitment Parties thereunder were expressly conditioned upon, among other things, the consummation of the Transaction in all material respects in accordance with the terms of the SPA, without giving effect to any amendment, supplement, waiver, or modification thereof that was materially adverse to the interests of the Commitment Parties, unless consented to by the Commitment Parties.
Notice of Termination of the Stock Purchase Agreement
We hereby inform the Administrative Agent that, on September 30, 2024, Penterra delivered a formal written Termination Notice (a copy of which is enclosed herewith as Enclosure 1) to Veridian Biosciences, Inc. and to David Ng, as Stockholder Representative, terminating the SPA pursuant to Section 8.1(d) thereof. The Termination Notice was delivered by hand, with copies transmitted simultaneously by email and overnight courier, in accordance with the notice provisions of Section 10.4 of the SPA.
The termination of the SPA was based upon the failure of certain conditions to Buyer's obligation to consummate the Closing set forth in Article VII of the SPA, specifically:
(a) Section 7.2(a) (Bring-Down of Representations and Warranties). The representations and warranties of the Sellers and the Company set forth in the SPA were required, as a condition to the Buyer's obligation to close, to be true and correct in all respects (without giving effect to any "materiality" or "Material Adverse Effect" qualifiers contained therein) as of the date of the SPA and as of the Closing Date as if made at and as of such date (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, have a Material Adverse Effect. The Sellers' representations and warranties could not be brought down to such standard as of the date of the Termination Notice, and such failures are incapable of being cured prior to the Outside Date of December 10, 2024.
(b) Section 7.2(b) (Absence of Material Adverse Effect). As a further condition to the Buyer's obligation to close, no Material Adverse Effect (as defined in Section 1.1 of the SPA) was to have occurred since the date of the SPA and be continuing as of the Closing Date. Based on matters that have come to Penterra's attention in the course of its ongoing due diligence and post-signing monitoring, a Material Adverse Effect has occurred with respect to the Company since the date of the SPA, which Material Adverse Effect is continuing and is, by its nature, incapable of being cured or remedied prior to the Outside Date.
The decision to terminate the SPA was duly authorized by the Board of Directors of Penterra at a meeting held on September 27, 2024, at which a quorum of directors was present, and such termination became effective upon the delivery of the Termination Notice to the Company and the Stockholder Representative on September 30, 2024, in accordance with the terms of the SPA.
Accordingly, the SPA has been terminated, the Transaction will not be consummated, and there is no longer any basis upon which the conditions precedent to funding under the Commitment Letter could be satisfied.
Request for Termination of Commitments Under the Commitment Letter
In light of the foregoing, and pursuant to the terms and conditions of the Commitment Letter (Ref. CL-2024-PPCA-0607), Penterra hereby formally requests that Ironclad Trust Company, N.A., in its capacity as Administrative Agent, and Summit Ridge Capital Partners, LP, in its capacity as Lead Arranger, acknowledge the termination of all commitments outstanding under the Commitment Letter, effective as of the date of this letter, October 1, 2024.
Because the Transaction will not close, the conditions precedent to funding under the Commitment Letter cannot and will not be satisfied. In particular, the Commitment Letter required, as conditions to drawdown of the Term Loan Facility, among other things: (i) the consummation of the Transaction in all material respects in accordance with the terms of the executed SPA; (ii) the delivery of executed closing documents, including a fully executed definitive Term Loan Credit Agreement, security documents, and ancillary documentation; and (iii) the satisfaction or waiver of all conditions to the Closing under the SPA. None of these conditions will occur, given the termination of the SPA and the abandonment of the Transaction.
We respectfully request that the Administrative Agent and the Lead Arranger confirm in writing that no further obligations exist on the part of either party under the Commitment Letter, except as specifically set forth therein with respect to provisions that survive termination. As described in greater detail below, Penterra acknowledges that provisions of the Commitment Letter relating to confidentiality, indemnification of the Commitment Parties and their respective affiliates, directors, officers, employees, advisors, agents, and controlling persons, and fee obligations that accrued prior to termination, among other provisions, survive the termination of the Commitment Letter in accordance with their respective terms.
Accrued Fees and Outstanding Obligations
Penterra acknowledges that certain fees have accrued under the Commitment Letter and the related Fee Letter dated June 7, 2024 (the "Fee Letter") prior to the termination of the commitments thereunder, and that such fees remain payable by Penterra in accordance with the terms of the Commitment Letter and the Fee Letter. Specifically:
Commitment Fee. Penterra has been paying and/or accruing the commitment fee of thirty-five basis points (0.35%) per annum on the full unfunded commitment amount of $500,000,000, calculated on the basis of a 365-day year and actual days elapsed, as provided in Section 3(a) of the Commitment Letter. From the date of the Commitment Letter (June 7, 2024) through the date of termination of the SPA (September 30, 2024), a period of approximately one hundred sixteen (116) days elapsed. Based on Penterra's calculations, the aggregate accrued commitment fee for such period is approximately $556,164 ($500,000,000 × 0.35% ÷ 365 × 116 days). Penterra acknowledges this amount as owing, subject to reconciliation by the Administrative Agent.
Ticking Fee. As provided in Section 3(b) of the Commitment Letter, a ticking fee of seventeen and one-half basis points (0.175%) per annum commenced on September 8, 2024, which date was ninety (90) calendar days after the signing of the SPA on June 10, 2024. From September 8, 2024 through September 30, 2024, a period of twenty-two (22) days elapsed during which the ticking fee accrued on the unfunded commitment amount. Penterra acknowledges this amount as owing, subject to final calculation and confirmation by the Administrative Agent.
Penterra respectfully requests that the Administrative Agent provide a final accounting and invoice for all accrued and unpaid commitment fees, ticking fees, and any other amounts owed by Penterra under the Commitment Letter and the Fee Letter, including, without limitation, any out-of-pocket expenses of the Commitment Parties that are reimbursable in accordance with the expense reimbursement provisions of the Commitment Letter, so that Penterra may arrange for prompt payment of all outstanding amounts. Penterra intends to satisfy all accrued fee obligations in full and in accordance with the payment terms set forth in the Commitment Letter and the Fee Letter, and will arrange for wire transfer of all amounts due within five (5) business days of receipt of the Administrative Agent's final invoice.
No Drawdown; No Term Loan Credit Agreement Executed
For the avoidance of doubt, and to confirm the record, Penterra hereby states as follows:
(a) No drawdown, borrowing, or advance of any kind was made under the Commitment Letter at any time prior to the date of this letter. The Term Loan Facility was never funded, in whole or in part.
(b) The definitive Term Loan Credit Agreement contemplated by the Commitment Letter was never executed in final form by any of the parties thereto. Although a draft of the Term Loan Credit Agreement was circulated by counsel to the Administrative Agent on or about July 22, 2024, and subsequently marked up and negotiated among the parties' respective counsel, the Term Loan Credit Agreement remained in active negotiation at the time the SPA was terminated and was never finalized or executed.
(c) Accordingly, there are no outstanding loans, accrued interest obligations, principal repayment obligations, or any other indebtedness arising under or in connection with the Commitment Letter or any related credit documentation.
Surviving Provisions
Penterra acknowledges that certain provisions of the Commitment Letter survive its termination in accordance with their respective terms, including, but not limited to, the following:
(a) Confidentiality. The confidentiality obligations of both Penterra and the Commitment Parties, as set forth in Section 9 of the Commitment Letter, shall continue in full force and effect in accordance with their terms following the termination of the commitments.
(b) Indemnification. The indemnification obligations of the Borrower in favor of the Commitment Parties and their respective affiliates, directors, officers, employees, advisors, agents, and controlling persons, as set forth in Section 8 of the Commitment Letter, shall continue in full force and effect in accordance with their terms following the termination of the commitments.
(c) Fee Payment Obligations. All fee payment obligations that accrued prior to the termination of the commitments, including commitment fees, ticking fees, and any other amounts payable under the Commitment Letter and the Fee Letter, shall remain due and payable in accordance with the terms thereof.
(d) Governing Law and Dispute Resolution. The governing law provisions (Section 11, providing for application of the laws of the State of New York) and dispute resolution provisions (Section 12, providing for submission to the exclusive jurisdiction of the federal and state courts located in the Borough of Manhattan, City of New York) of the Commitment Letter shall survive the termination of the commitments.
Penterra hereby confirms that it acknowledges and will comply with all such surviving obligations in accordance with their respective terms.
Request for Written Confirmation
Penterra respectfully requests that Ironclad Trust Company, N.A., in its capacity as Administrative Agent, and Summit Ridge Capital Partners, LP, in its capacity as Lead Arranger, provide written confirmation, at their earliest convenience, of the following:
1. That all commitments under the Commitment Letter (Ref. CL-2024-PPCA-0607) are terminated, effective as of October 1, 2024;
2. That no further funding obligations exist on the part of any Commitment Party under the Commitment Letter, and that neither the Administrative Agent nor the Lead Arranger has any further obligation to arrange, syndicate, or fund any portion of the Term Loan Facility; and
3. The total amount of all accrued and unpaid fees, expenses, and other amounts owed by Penterra as of the date of termination, including a detailed breakdown of the commitment fee, ticking fee, and any reimbursable expenses.
Such written confirmation should be directed to the undersigned at the address set forth below, with a copy to Thomas F. Holbrook, General Counsel & Secretary, Penterra Pharmaceuticals Corp., at the address set forth in the Contact Information section below. We would appreciate receiving such confirmation no later than October 15, 2024, in order to facilitate the orderly closing out of all matters related to the Commitment Letter.
Contact Information
Any questions, correspondence, or notices regarding this letter or any matters related to the termination of the Commitment Letter should be directed to:
Oliver Mackenzie, Partner Calderwood & Harkness LLP 200 Park Avenue, 42nd Floor New York, New York 10166 Telephone: (212) 558-4217
Email: omackenzie@calderwoodharkness.com
Thomas F. Holbrook, General Counsel & Secretary Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540 Telephone: (609) 844-3100
Email: tholbrook@penterrapharma.com
Reservation of Rights
Nothing in this letter shall be deemed a waiver of any right, remedy, claim, or defense of Penterra under the Commitment Letter, the Fee Letter, the SPA, or applicable law, whether at law or in equity. Penterra expressly reserves all such rights and remedies, in their entirety, without limitation. This letter is delivered without prejudice to any position Penterra may take in any proceeding or dispute, and nothing herein constitutes an admission of liability or an acknowledgment of any obligation other than those expressly stated herein.
We appreciate the cooperation of Ironclad Trust Company, N.A. and Summit Ridge Capital Partners, LP throughout this process and regret that the Transaction did not proceed to closing. We trust that the termination of the commitments can be confirmed promptly and that all remaining administrative matters can be resolved in an orderly and efficient manner. Please do not hesitate to contact us should you have any questions or require any additional information.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Oliver Mackenzie Partner, Mergers & Acquisitions
Acting on behalf of Penterra Pharmaceuticals Corp.
Enclosures:
1. Copy of Termination Notice dated September 30, 2024 (delivered to Veridian Biosciences, Inc. and David Ng, as Stockholder Representative)
cc:
Summit Ridge Capital Partners, LP 277 Park Avenue, 40th Floor New York, New York 10172
Attention: Philip Ostrander, Managing Director
Thomas F. Holbrook, General Counsel & Secretary Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540
Catherine M. Burgess, Chief Financial Officer Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540