1018-00008 · Penterra Pharmaceuticals Corp · Post-Termination & Litigation Prep

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, NY 10166

October 10, 2024

MEMORANDUM

PRIVILEGE LEGEND: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of Penterra Pharmaceuticals Corp. It is intended solely for the use of the addressee and the individuals copied hereon in connection with the above-referenced matter. This memorandum contains legal advice and mental impressions of counsel. It should not be disclosed, distributed, or otherwise made available to any third party without the prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.

I. Executive Summary

This memorandum analyzes whether the $45,000,000 reverse termination fee (the "RTF") provided for under Section 8.2(b) of the Stock Purchase Agreement (the "SPA"), dated June 10, 2024, among Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer"), Veridian Biosciences, Inc. ("Veridian" or the "Company"), the Sellers listed therein, and David Ng, acting in his capacity as the Stockholder Representative, is payable by Penterra following its termination of the SPA on September 30, 2024.

For the reasons set forth in detail below, it is our conclusion that the RTF is not payable. The RTF provision, properly construed under its plain terms and the overall architecture of the SPA, is triggered exclusively by a "Financing Failure" — that is, the Buyer's failure to consummate the closing due to the unavailability of the committed debt financing described in the Commitment Letter. Penterra's termination of the SPA was not the result of a Financing Failure. Rather, Penterra exercised its termination right under SPA Section 8.1(d) on the independent and well-supported ground that the conditions to Buyer's obligation to close under Sections 7.2(a) and 7.2(b) were not satisfied — and were incapable of being satisfied prior to the Outside Date — due to the occurrence of a material adverse effect ("MAE") relating to (i) the adverse Phase II clinical trial data for VRD-4187 reported by the Marlowe Asset Management-2 Data Monitoring Committee on August 14, 2024, and (ii) the FDA's imposition of a partial clinical hold on VRD-4187 (IND 154832) on August 22, 2024.

At no time prior to or following termination did the $500,000,000 committed senior secured term loan facility from Summit Ridge Capital Partners, LP ("Summit Ridge") and Ironclad Trust Company, N.A. ("Ironclad") (Commitment Letter Ref. CL-2024-PPCA-0607, dated June 7, 2024) (the "Commitment Letter" and the "Financing") become unavailable. The lenders did not withdraw, reduce, modify, or indicate any inability or unwillingness to fund their commitments. The Financing remained in full force and effect through the date of termination and was terminated only upon Penterra's voluntary notice to Ironclad dated October 1, 2024 — the day following Penterra's termination of the SPA. The Financing was not drawn solely because Penterra exercised its contractual right not to close. There was no Financing Failure.

Moreover, Penterra's cash on hand as of Q2 2024 — approximately $2.1 billion — was more than sufficient to fund the entire $900,000,000 purchase price independently, without any recourse to debt financing. This fact further underscores that the non-closing had nothing to do with financing availability.

Recommendation. We recommend that Penterra be prepared to vigorously defend against any claim by Veridian or the Stockholder Representative (David Ng, acting on behalf of Crestline Ventures, LP) that the RTF is owed. As a threshold matter, Penterra should immediately take steps to preserve all documentation — including communications with Summit Ridge and Ironclad, internal treasury records, and board materials — establishing the continued availability of the Financing through and beyond the termination date. The RTF inapplicability argument is a straightforward question of contract interpretation under Delaware law and should be suitable for early dispositive motion practice in any anticipated litigation.

II. Background and Procedural History

A. The Transaction

On June 10, 2024, Penterra entered into a definitive Stock Purchase Agreement to acquire 100% of the outstanding capital stock of Veridian Biosciences, Inc. for an aggregate cash purchase price of $900,000,000 (the "Transaction"). The SPA was executed by Penterra, Veridian, the stockholders of Veridian identified on the signature pages thereto (the "Sellers"), and David Ng, in his capacity as the Stockholder Representative.

Veridian is a privately held, clinical-stage biotechnology company focused on immuno-oncology therapeutics, incorporated under the laws of the State of Delaware and headquartered at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian's primary asset and the principal driver of the Transaction is its lead drug candidate, VRD-4187, a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3") for the treatment of small cell lung cancer ("SCLC"). At the time of signing, VRD-4187 was in a Phase II clinical trial designated Marlowe Asset Management-2 (ClinicalTrials.gov Identifier: NCT05837291). Veridian is a pre-revenue company; for its fiscal year ended December 31, 2023, it reported no product revenue and a net loss of approximately $87.3 million. Veridian's operations have been funded principally through venture capital financing led by Crestline Ventures, LP.

Penterra is a publicly traded specialty pharmaceutical company listed on the Nasdaq Global Select Market under the ticker symbol "PPCA." It is incorporated under the laws of the State of Delaware and headquartered at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540. As of June 2024, Penterra had a market capitalization of approximately $14.2 billion, reported fiscal year 2023 revenue of approximately $4.87 billion, and maintained cash and cash equivalents on hand of approximately $2.1 billion as of the end of the second quarter of 2024. Penterra's acquisition of Veridian was intended to bolster its oncology pipeline with VRD-4187 as a potential first-in-class therapy for SCLC.

The Transaction was negotiated over a period of approximately four months, with initial indications of interest exchanged in February 2024 and exclusivity granted to Penterra in April 2024. Penterra's financial advisor on the Transaction was Garrison Zanthor & Co., LLC, led by Kevin Driscoll, Managing Director. Veridian's financial advisor was Ridgeway Partners LLC, led by Laura Beckett, Managing Director. Penterra was represented by this firm, Calderwood & Harkness LLP. Veridian and the Sellers were represented by Zalcourt Archer & Cole LLP, with Rebecca Whitmore serving as lead partner.

B. Financing Structure

The $900,000,000 cash purchase price was to be funded through a combination of (i) $500,000,000 in proceeds from a committed senior secured term loan facility (the "Term Loan Facility") and (ii) approximately $400,000,000 from Penterra's existing cash on hand.

The Term Loan Facility was the subject of a commitment letter (the "Commitment Letter"), executed on June 7, 2024 (Reference: CL-2024-PPCA-0607), by and among Summit Ridge Capital Partners, LP, as lead arranger and bookrunner, and Ironclad Trust Company, N.A., as administrative agent and a lender. The Commitment Letter provided for a $500,000,000 senior secured term loan bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 225 basis points, with a maturity of seven years.

The economic terms of the Commitment Letter included a commitment fee of 0.35% per annum on unfunded commitments (amounting to $1,750,000 per annum, or approximately $4,795 per day) and a ticking fee of 0.175% per annum, commencing 90 days after the signing of the SPA (i.e., beginning September 8, 2024). The ticking fee was designed to compensate the lenders for the continued reservation of capital in the event the closing was delayed beyond the initial 90-day period. The financing commitment was co-terminous with the SPA's Outside Date of December 10, 2024, meaning the lenders' obligations to fund would expire automatically if the closing had not occurred by that date.

It is critical to note, as described in greater detail below, that Penterra's Q2 2024 cash on hand of approximately $2.1 billion was more than sufficient to fund not only the $400,000,000 cash portion of the purchase price but, indeed, the entire $900,000,000 purchase price without any resort to the committed debt financing. The Term Loan Facility was utilized as part of Penterra's capital allocation strategy to preserve balance sheet flexibility and was supplemental — not essential — to Penterra's ability to consummate the Transaction.

C. Key Post-Signing Events and Termination

The period following execution of the SPA was marked by significant adverse developments with respect to Veridian's lead drug candidate, VRD-4187, which ultimately gave rise to Penterra's termination of the SPA. The key events are as follows:

August 14, 2024 — Marlowe Asset Management-2 Data Monitoring Committee Interim Analysis. The independent Data Monitoring Committee ("DMC") for the Marlowe Asset Management-2 Phase II clinical trial conducted a pre-planned interim analysis of safety and efficacy data. The DMC findings were alarming. The DMC recommended a suspension of enrollment in the trial based on the following key findings: (a) the incidence of Grade 3 or higher cytokine release syndrome ("CRS") in the VRD-4187 treatment arm was 23.4%, compared to 4.1% in the control arm — a rate approximately five to six times higher than anticipated in the trial's statistical analysis plan and substantially in excess of the rates reported in the Phase I dose-escalation study; (b) there were seven treatment-related deaths in the VRD-4187 arm (3.6% of enrolled subjects), compared to one treatment-related death in the control arm (0.5%); and (c) the overall response rate ("ORR") for VRD-4187 was 31.4%, which was not statistically significant compared to the control arm's ORR of 28.9% (p = 0.58). The combination of a dramatically elevated safety signal and a non-significant efficacy signal fundamentally undermined the clinical and commercial viability of VRD-4187.

August 16, 2024 — Disclosure to Penterra. Penterra received formal notice of the DMC findings from Veridian pursuant to SPA Section 5.1(b), which required Veridian to promptly notify Penterra of any material development relating to the Company's business, operations, or assets, including any material development in any clinical trial or regulatory proceeding.

August 19, 2024 — Supplemental Clinical Assessment. Broadleaf Scientific Consulting LLC ("Broadleaf"), Penterra's independent clinical due diligence advisor, delivered a supplemental clinical assessment to Penterra evaluating the DMC findings (prepared by Dr. Raymond Kapoor, Ph.D., Managing Principal). The Broadleaf assessment concluded that the safety profile of VRD-4187 at the 1.5 mg/kg dose was inconsistent with a commercially viable therapeutic index and that the FDA was likely to impose regulatory action on the clinical program.

August 22, 2024 — FDA Partial Clinical Hold. The U.S. Food and Drug Administration ("FDA") imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application No. 154832 ("IND 154832"). The partial clinical hold prohibited new patient enrollment in the Marlowe Asset Management-2 trial and required Veridian to submit a comprehensive response addressing the safety concerns, including a revised protocol with dose modifications and enhanced CRS mitigation measures, before enrollment could resume.

August 28, 2024 — Protocol Amendment. Veridian implemented a protocol amendment (Protocol v4.0) to Marlowe Asset Management-2, incorporating mandatory tocilizumab prophylaxis for all treated patients and reducing the VRD-4187 dose from 1.5 mg/kg to 0.75 mg/kg. While these measures were responsive to the safety concerns, they significantly altered the clinical development path and timeline for VRD-4187, with uncertain implications for efficacy at the reduced dose level.

September 6, 2024 — Deficiency Notice. Penterra, through this firm, delivered a formal Deficiency Notice to Veridian alleging that a material adverse effect had occurred within the meaning of SPA Section 1.1 and that, as a consequence, the conditions to Buyer's obligation to close under Sections 7.2(a) and 7.2(b) were not satisfied and could not reasonably be expected to be satisfied prior to the Outside Date. The Deficiency Notice set forth the factual basis for Penterra's position in detail, including the DMC findings, the FDA partial clinical hold, the Broadleaf assessment, and an analysis of the commercial implications of the dose reduction protocol.

September 13, 2024 — Veridian's Response. Veridian, through Zalcourt Archer & Cole LLP, responded to the Deficiency Notice, disputing that an MAE had occurred. Veridian's position, in essence, was that (i) the adverse clinical data fell within the MAE carveouts for conditions affecting the biotechnology and pharmaceutical industries generally; (ii) the Phase II data, while disappointing, did not rise to the level of an MAE under Delaware law's demanding standard; and (iii) Penterra was obligated to proceed to closing. Veridian's response demanded that Penterra consummate the closing in accordance with the SPA.

September 27, 2024 — Board Authorization of Termination. The Penterra Board of Directors, chaired by Margaret Liu Whitfield, convened a special meeting to consider the status of the Veridian Transaction. After reviewing presentations from management, this firm, Garrison Zanthor & Co., and Broadleaf Scientific Consulting, the Board unanimously authorized the termination of the SPA on the grounds that a material adverse effect had occurred and that the conditions to Buyer's obligation to close could not be satisfied prior to the Outside Date.

September 30, 2024 — Termination Notice. Penterra, through this firm, delivered a formal Termination Notice to Veridian, the Sellers, and the Stockholder Representative pursuant to SPA Section 8.1(d), terminating the SPA effective immediately. The Termination Notice stated that Penterra was exercising its right to terminate the SPA on the grounds that the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) had not been satisfied and were incapable of being satisfied prior to the Outside Date of December 10, 2024, due to the occurrence of a material adverse effect.

October 1, 2024 — Termination of Financing Commitment. Calderwood & Harkness LLP, on behalf of Penterra, sent a notice to Ironclad Trust Company, N.A. (attention: Samantha Hwang, Vice President, Loan Administration) requesting termination of the $500,000,000 commitment under the Commitment Letter. This termination was a voluntary act by Penterra, taken the day after the SPA was terminated. The lenders acknowledged the termination without objection.

October 15, 2024 — Veridian's Demand Letter. Veridian, through Zalcourt Archer & Cole LLP (Rebecca Whitmore), sent a demand letter to Penterra threatening litigation in the Court of Chancery of the State of Delaware. The demand letter asserted that Penterra's termination was invalid, demanded that Penterra proceed to closing, and stated that Veridian intended to seek specific performance and, alternatively, damages. The demand letter also referenced the RTF, asserting that at a minimum, Penterra owed the $45,000,000 RTF to the Sellers. It is this latter assertion — the claim that the RTF is payable — that is the subject of this memorandum.

III. Relevant SPA Provisions

This Section sets forth the SPA provisions relevant to the RTF analysis, together with our interpretive commentary. We analyze these provisions in light of their plain language, the internal architecture of the SPA, and established principles of Delaware contract interpretation.

A. Section 8.1 — Termination Rights

Article VIII of the SPA governs the parties' respective termination rights. Section 8.1 sets forth five distinct termination provisions, each triggered by different factual predicates. The following subsections are relevant to our analysis:

Section 8.1(b) — Outside Date Termination. Section 8.1(b) permits either party to terminate the SPA if the closing has not occurred by the Outside Date, which is defined as December 10, 2024 (i.e., 180 days following the date of the SPA). This right is subject to the limitation that the terminating party may not exercise it if the failure of the closing to occur by the Outside Date was primarily caused by such party's material breach of the SPA. This provision serves as a "drop-dead date" mechanism, ensuring that neither party remains bound indefinitely. Penterra did not invoke Section 8.1(b).

Section 8.1(c) — Termination for Breach by Sellers. Section 8.1(c) permits the Buyer to terminate the SPA if the Sellers are in material breach of any of their representations, warranties, or covenants contained in the SPA, and such breach would cause the conditions to Buyer's obligation to close set forth in Section 7.2 not to be satisfied, and such breach is not cured within 30 calendar days following delivery of written notice of such breach to the Sellers. Penterra did not invoke Section 8.1(c) as the basis for termination, although the Deficiency Notice dated September 6, 2024, referenced certain representation concerns in addition to the MAE claim.

Section 8.1(d) — Termination for Failure of Buyer's Closing Conditions. Section 8.1(d) permits the Buyer to terminate the SPA if the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) have not been satisfied and, in the reasonable judgment of the Buyer, are incapable of being satisfied prior to the Outside Date. This is the provision under which Penterra terminated the SPA. The provision operates as a "condition failure" termination right, permitting the Buyer to exit the Transaction when the factual predicates for its closing obligation have failed and cannot be restored within the contractual timeframe.

Section 8.1(e) — Buyer's Closing Failure. Section 8.1(e) permits the Sellers to terminate the SPA if the Buyer fails to consummate the closing within five business days after all conditions to closing set forth in Sections 7.1 (conditions to the obligation of all parties) and 7.2 (conditions to the Buyer's obligation) have been satisfied or waived. This provision is denominated in the SPA as the "Buyer's Closing Failure" and represents the primary trigger mechanism for the RTF, as discussed in Section III.C below. Notably, Section 8.1(e) was not invoked by either party. The Sellers did not terminate the SPA at any time prior to Penterra's delivery of the Termination Notice on September 30, 2024.

The structural distinction among these termination rights is critical. Each provision addresses a different factual scenario, and the SPA's termination fee provisions (Sections 8.2(a) and 8.2(b)) are keyed to specific termination triggers — not to termination generally. As analyzed below, the RTF is triggered only by a termination under Section 8.1(e) or Section 8.1(b) under specified circumstances; it is not triggered by a termination under Section 8.1(d).

B. Section 7.2 — Conditions to Buyer's Obligation to Close

Section 7.2 of the SPA sets forth the conditions precedent to the Buyer's obligation to consummate the closing. The two conditions most relevant to this analysis are:

Section 7.2(a) — Accuracy of Representations and Warranties. Section 7.2(a) provides 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 the materiality and material adverse effect qualifiers set forth therein) as of the Closing Date as though made on and as of such date (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case it shall be true and correct as of such earlier date). Penterra's position is that certain of the Sellers' representations — including those relating to the conduct of Veridian's clinical trials in compliance with applicable law and protocols, the accuracy of clinical data provided to Penterra, and the absence of material undisclosed liabilities — cannot be brought down as true and correct in light of the Marlowe Asset Management-2 developments.

Section 7.2(b) — No Material Adverse Effect. Section 7.2(b) provides that no material adverse effect shall have occurred since the date of the SPA (June 10, 2024) and be continuing as of the Closing Date. This condition is the centerpiece of Penterra's termination rationale. The occurrence of the adverse Phase II clinical data and the FDA partial clinical hold, taken together, constitute a material adverse effect within the meaning of the SPA, as analyzed in our prior memoranda dated August 25, 2024, and September 2, 2024.

Other conditions to closing set forth in Section 7.2 include, among others: (iii) receipt of HSR Act clearance (which was obtained on May 20, 2024, following early termination of the waiting period); (iv) delivery of the required stockholder consent (which was obtained on June 14, 2024, within four days of signing); (v) delivery of customary closing certificates; (vi) execution and delivery of the escrow agreement by the escrow agent; and (vii) delivery of a FIRPTA certificate. The non-satisfaction of conditions (iii) and (iv) is not at issue; those conditions were satisfied well in advance of the events giving rise to Penterra's termination.

C. Section 8.2(b) — Reverse Termination Fee

Section 8.2(b) of the SPA is the operative provision establishing the RTF. This is the provision that Veridian has asserted entitles the Sellers to a payment of $45,000,000 from Penterra. We set forth below a detailed textual analysis of this provision.

Section 8.2(b) provides, in relevant part:

In the event that (i) this Agreement is terminated by the Sellers pursuant to Section 8.1(e) as a result of the Buyer's failure to consummate the Closing due to the unavailability of the Financing, or (ii) this Agreement is terminated by either the Buyer or the Sellers pursuant to Section 8.1(b) and, at the time of such termination, all of the conditions to the Closing set forth in Sections 7.1 and 7.2 have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, each of which shall be capable of being satisfied at the Closing) and the Buyer has failed to consummate the Closing solely because the Financing has not been funded, then the Buyer shall pay to the Stockholder Representative (for distribution to the Sellers on a pro rata basis) a fee equal to $45,000,000 (the "Reverse Termination Fee") within three (3) business days following such termination by wire transfer of immediately available funds to an account designated in writing by the Stockholder Representative. The Reverse Termination Fee shall be the sole and exclusive remedy of the Sellers and the Stockholder Representative against the Buyer and its Affiliates in the event of a termination described in this Section 8.2(b), and in no event shall the Sellers, the Stockholder Representative, or any of their respective Affiliates seek or be entitled to any other monetary damages, equitable relief, or any other remedy against the Buyer or its Affiliates in connection with a Financing Failure.

Several features of this provision are critical to the analysis:

First, the RTF is payable only in two enumerated scenarios, each of which requires a specific termination trigger under Section 8.1:

Trigger (i): Termination by the Sellers under Section 8.1(e) (Buyer's Closing Failure) as a result of the Buyer's failure to close due to the unavailability of the Financing; or

Trigger (ii): Termination by either party under Section 8.1(b) (Outside Date) where (a) all closing conditions have been satisfied or waived and (b) the Buyer has failed to close solely because the Financing has not been funded.

Neither trigger is satisfied here. The SPA was terminated by the Buyer under Section 8.1(d), which is not referenced in either subsection of Section 8.2(b).

Second, both triggering clauses contain explicit causation language — "as a result of" and "due to the unavailability of the Financing" in Trigger (i), and "solely because the Financing has not been funded" in Trigger (ii). This language imposes a strict causal nexus between the non-closing and a financing deficiency. The RTF is not payable when the non-closing is attributable to any other cause, including the failure of Buyer's closing conditions due to an MAE.

Third, the RTF is expressly characterized as the "sole and exclusive remedy" of the Sellers in the event of a "Financing Failure." The use of the defined concept "Financing Failure" — which the provision employs as a shorthand for the scenarios described in Triggers (i) and (ii) — confirms that the RTF is a limited-purpose remedy designed to address a specific risk allocation concern: the risk that the Buyer's committed lenders will fail to fund their obligations, thereby preventing the Buyer from consummating an acquisition it is otherwise willing and contractually required to complete. The RTF amount of $45,000,000 (representing 5% of the $900,000,000 purchase price) was negotiated as the measure of the Sellers' damages in such a scenario, recognizing that in a financing failure, the Sellers would bear a loss without having had any direct relationship with or recourse against the Buyer's lenders.

Fourth, the RTF does not apply to a termination under Section 8.1(d), which is the provision Penterra invoked. This omission is neither accidental nor ambiguous. The SPA's termination architecture carefully delineates the consequences of termination under each provision. The exclusion of Section 8.1(d) from the RTF triggers reflects the parties' negotiated allocation of risk: if the Buyer terminates because its closing conditions have failed (as opposed to failing to close when conditions are satisfied), the RTF does not apply. In such a scenario, the Sellers' rights and remedies are governed by the general effect-of-termination provision (Section 8.3) and the specific performance provision (Section 10.12), as applicable.

D. Section 8.2(a) — Target Termination Fee (Comparison)

By contrast to the RTF, Section 8.2(a) establishes a "Target Termination Fee" of $36,000,000 (representing 4% of the $900,000,000 purchase price) payable by the Sellers to the Buyer in the event that the SPA is terminated as a result of a breach by Veridian of the no-shop provision set forth in Section 5.4 — specifically, if Veridian engaged in prohibited solicitation of, or entered into negotiations or discussions with, a third party regarding an alternative acquisition proposal in violation of its exclusivity obligations.

The comparison between Section 8.2(a) and Section 8.2(b) is instructive. Each termination fee provision is triggered by a specific, enumerated event: the Target Termination Fee is triggered by a violation of the no-shop obligation, while the RTF is triggered by a Financing Failure. Neither fee operates as a general "break fee" or "walk-away fee" payable upon any termination of the SPA. The parallel structure of the two fee provisions highlights the parties' clear intent that each termination fee is a tailored remedy tied to a particular breach or failure scenario — not a default consequence of any termination.

This structural parallelism is relevant because it rebuts any argument that the RTF was intended as a general cap on Buyer's liability or as a fee payable in any circumstance where the Buyer does not close. If the parties had intended such a result, they would not have carefully limited the RTF's triggers to the specific Financing Failure scenarios described in Section 8.2(b).

E. Section 8.3 — Effect of Termination

Section 8.3 provides that upon a valid termination of the SPA in accordance with Section 8.1, the SPA shall become void and of no further force or effect, and there shall be no liability on the part of any party hereto, except that the following provisions shall survive termination: (i) the confidentiality obligations set forth in Section 5.3; (ii) the termination fee provisions of Section 8.2; (iii) the governing law and jurisdiction provisions of Sections 10.5 and 10.6; (iv) the waiver of jury trial provision of Section 10.7; and (v) this Section 8.3 itself.

Critically, Section 8.3 includes a proviso that the foregoing limitation on liability shall not relieve any party from liability for damages arising from a "willful and material breach" of the SPA. This "carve-out" for willful and material breach ensures that a party cannot intentionally sabotage a transaction and then claim the protection of the effect-of-termination provision.

The import of Section 8.3 for the present analysis is as follows: if the RTF is not triggered (as we conclude it is not), then upon Penterra's valid termination under Section 8.1(d), the SPA is void and Penterra has no further liability to Veridian or the Sellers, except (a) as provided by the surviving provisions (none of which impose affirmative payment obligations on Penterra in this scenario) and (b) in the event of a willful and material breach, which Penterra has not committed. Penterra's liability upon a valid termination is thus limited to the surviving provisions, and Veridian's sole recourse — if it disputes the validity of the termination — is to challenge the MAE determination, not to claim the RTF.

F. Definition of "Material Adverse Effect" — SPA Section 1.1

Although a comprehensive analysis of whether an MAE occurred is beyond the scope of this memorandum (and is addressed in our prior memoranda dated August 25, 2024, and September 2, 2024), a brief summary of the MAE definition is necessary for context, as the validity of Penterra's termination under Section 8.1(d) depends on the occurrence of an MAE.

Section 1.1 of the SPA defines "Material Adverse Effect" as:

any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Sellers to consummate the Transactions contemplated by this Agreement.

The definition includes a series of exclusions (commonly referred to as "carveouts") providing that none of the following shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect:

(i) changes in general economic, regulatory, or political conditions;

(ii) changes in conditions generally affecting the biotechnology or pharmaceutical industries;

(iii) changes in applicable law or in accounting standards (including GAAP);

(iv) epidemics, pandemics, or disease outbreaks (including COVID-19);

(v) natural disasters, acts of God, acts of war, armed hostilities, sabotage, or terrorism;

(vi) changes in financial, banking, or securities markets generally (including any disruption thereof); or

(vii) the announcement or pendency of the Transactions contemplated by this Agreement.

Each of carveouts (i) through (vi) is subject to a "disproportionate impact" exception: the carveout does not apply if the relevant event, change, or condition has a disproportionate adverse effect on the Company relative to other companies operating in the biotechnology industry of comparable size and stage of development. Carveout (vii) is not subject to the disproportionate impact exception.

For purposes of this memorandum, the salient point is that Penterra's position — that the Marlowe Asset Management-2 Phase II data and the FDA partial clinical hold constitute an MAE — is based on events that are specific to Veridian and VRD-4187, rather than on conditions generally affecting the biotechnology industry. The adverse safety signal (23.4% Grade ≥3 CRS, seven treatment-related deaths) and the resulting FDA partial clinical hold are company-specific events that go to the heart of Veridian's sole material asset. As such, the industry-wide carveout in clause (ii) does not apply to shield these events from the MAE determination, and even if it did, the disproportionate impact exception would reinstate them.

IV. Analysis: The RTF Is Not Triggered

Having set forth the relevant background and contractual provisions, we turn to the core analysis. For the reasons discussed below, we conclude that the RTF under SPA Section 8.2(b) is not payable by Penterra.

A. Penterra's Termination Was Pursuant to Section 8.1(d), Not Section 8.1(e) or Section 8.1(b)

The threshold and most dispositive point is straightforward: Penterra terminated the SPA pursuant to Section 8.1(d), and Section 8.1(d) is not a triggering provision for the RTF under Section 8.2(b).

As described in Section II.C above, Penterra delivered its Termination Notice on September 30, 2024, expressly invoking Section 8.1(d) of the SPA. The Termination Notice stated that the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) had not been satisfied and were incapable of being satisfied prior to the Outside Date of December 10, 2024, due to the occurrence of a material adverse effect. The Termination Notice did not reference any inability to fund the purchase price or any deficiency in the Financing.

The termination was not a "Buyer's Closing Failure" under Section 8.1(e). Penterra did not fail to close after all conditions to closing had been satisfied or waived. To the contrary, Penterra's position — supported by extensive legal, clinical, and financial analysis — is that the conditions to closing in Sections 7.2(a) and 7.2(b) were not satisfied, due to the occurrence of an MAE and the inability to bring down the Sellers' representations as true and correct. The predicate for a Buyer's Closing Failure — that all conditions have been satisfied and the Buyer has nevertheless failed to consummate the closing — was absent.

Nor did the termination occur under Section 8.1(b) (Outside Date). The Outside Date under the SPA is December 10, 2024. Penterra's termination occurred on September 30, 2024 — more than two months before the Outside Date. There was no termination on the Outside Date, and there is no basis for treating the termination as if it had occurred under Section 8.1(b).

Because neither RTF trigger clause in Section 8.2(b) — Trigger (i) (termination under Section 8.1(e) due to a Financing Failure) nor Trigger (ii) (termination under Section 8.1(b) where all conditions are satisfied but Financing has not been funded) — is applicable, the RTF is not payable.

Under established principles of Delaware contract law, the plain language of a negotiated agreement is the best evidence of the parties' intent. See Salamone v. Gorman, 106 A.3d 354, 367–68 (Del. 2014); Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006). Where contract language is clear and unambiguous, courts will give effect to the parties' intent as reflected in the express terms of the agreement without resort to extrinsic evidence. See Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). Here, Section 8.2(b) identifies the RTF triggers with specificity: termination under Section 8.1(e) or Section 8.1(b), in each case requiring a Financing Failure. Section 8.1(d) is simply not among the enumerated triggers. The absence of any reference to Section 8.1(d) in Section 8.2(b) is dispositive under the plain-language canon.

B. No Financing Failure Occurred

Even if one were to look beyond the specific termination provision invoked and examine whether a Financing Failure occurred — which, under the SPA's plain language, is unnecessary given that the threshold requirement of the correct termination trigger has not been met — the answer is unequivocally no.

The committed term loan facility of $500,000,000 under the Commitment Letter (Ref. CL-2024-PPCA-0607) remained in full force and effect through the termination date of September 30, 2024. At no point did Summit Ridge Capital Partners, LP (Philip Ostrander, Managing Director) or Ironclad Trust Company, N.A. (Samantha Hwang, Vice President) withdraw, reduce, amend, or modify their commitments, nor did either lender indicate any inability or unwillingness to fund the term loan. The Commitment Letter, by its terms, was co-terminous with the SPA Outside Date of December 10, 2024, and the lenders' funding obligations remained operative through that date.

Penterra did not draw on the facility because it exercised its contractual right to terminate the SPA prior to closing. The non-drawing was a consequence of Penterra's decision not to proceed with the Transaction, not a consequence of any deficiency in the Financing. The Financing was not drawn because the closing did not occur; the closing did not occur because Penterra validly terminated under Section 8.1(d) based on an MAE. There is a clear and critical distinction between (a) a buyer that cannot close because its financing has failed (a Financing Failure) and (b) a buyer that does not close because its closing conditions have not been satisfied (a condition-failure termination). This distinction is precisely what Section 8.2(b) was designed to capture.

The continued availability of the Financing is confirmed by objective evidence. Penterra's commitment fee obligations under the Commitment Letter continued to accrue throughout the pre-termination period. Specifically, the commitment fee accrued from June 7, 2024 (the date of the Commitment Letter) through September 30, 2024 (the date of the SPA termination), a period of approximately 116 days. Based on a commitment fee rate of 0.35% per annum on the $500,000,000 unfunded commitment, the accrued commitment fee for this period was approximately $556,164 (calculated as $500,000,000 × 0.35% ÷ 365 × 116). In addition, the ticking fee commenced on September 8, 2024 (90 days after the SPA signing date), and accrued at a rate of 0.175% per annum through the termination date — a period of 22 days, resulting in an additional accrual of approximately $52,740. Penterra's payment of these fees to the lenders constitutes compelling evidence that the Financing remained available and in good standing. Lenders do not charge commitment and ticking fees on commitments they have withdrawn or are unwilling to honor.

Furthermore, Penterra's voluntary termination of the commitment on October 1, 2024 — the day after the SPA was terminated — further confirms that the Financing commitment was extinguished at Penterra's election, not at the lenders' instigation. The notice to Ironclad Trust Company, N.A. (attention: Samantha Hwang) requesting termination of the commitment was a routine administrative step following the termination of the underlying acquisition agreement. It was not the result of a lender default, withdrawal, or refusal to fund.

Finally, the broader financial context confirms the absence of any Financing Failure. Penterra's cash on hand as of Q2 2024 was approximately $2.1 billion — more than sufficient to fund the entire $900,000,000 purchase price from internal resources, without any resort to debt financing whatsoever. The Term Loan Facility was utilized as part of Penterra's optimal capital structure strategy, not out of necessity. Penterra's ability to fund the acquisition from its own balance sheet is the ultimate refutation of any claim that the non-closing was attributable to financing unavailability.

C. The RTF Is a Financing-Specific Remedy, Not a General Termination Fee

The conclusion that the RTF is inapplicable is further reinforced by a textual and structural analysis of Section 8.2(b) within the broader framework of the SPA.

As discussed in Section III.C above, the RTF provision employs specific causation language. Trigger (i) requires that the Buyer's failure to close be "as a result of" and "due to the unavailability of the Financing." Trigger (ii) requires that the Buyer's failure to close be "solely because the Financing has not been funded." These phrases are not surplusage. They impose an affirmative causal requirement: the RTF is payable only when the cause of the non-closing is a financing deficiency. If the non-closing is caused by any other factor — including, as here, the failure of Buyer's closing conditions due to an MAE — the RTF is not triggered, regardless of whether the financing was or was not available.

The word "solely" in Trigger (ii) is particularly significant. Under Delaware law, "solely" means "to the exclusion of all else" or "only." See Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715, 738 (Del. Ch. 2008) (interpreting similar causation language in a financing-failure context). The inclusion of "solely" in Trigger (ii) ensures that the RTF is not triggered when the non-closing is attributable to a combination of financing unavailability and some other factor (e.g., condition failure), let alone when the non-closing is attributable entirely to a non-financing cause.

In the present case, Penterra's decision not to close was caused by the occurrence of a material adverse effect — specifically, the adverse Marlowe Asset Management-2 Phase II clinical data (23.4% Grade ≥3 CRS incidence, seven treatment-related deaths representing a 3.6% mortality rate, and a non-statistically significant overall response rate of 31.4% versus 28.9% in the control arm with p = 0.58) and the FDA's imposition of a partial clinical hold on VRD-4187 (IND 154832) on August 22, 2024. These events rendered the closing conditions in Sections 7.2(a) and 7.2(b) unsatisfied. There is no causal nexus between the non-closing and any financing deficiency. The Financing was available; Penterra did not close because the conditions to its obligation to close were not met.

The negotiating history of the RTF provision further confirms this interpretation, although resort to extrinsic evidence is unnecessary given the clarity of the contract language. As reflected in the negotiation drafts exchanged between Calderwood & Harkness and Zalcourt Archer & Cole between April and June 2024, the RTF was specifically proposed by Veridian's counsel as protection against the risk that Penterra's committed lenders would fail to fund the $500,000,000 term loan, leaving Veridian without a completed sale after months of exclusivity and the disruption of its business during the pendency of the Transaction. The RTF amount of $45,000,000 (5% of the purchase price) was calibrated to this specific risk. During negotiations, Penterra's negotiating team observed that Penterra's substantial cash on hand ($2.1 billion) and the $500 million/$400 million funding split meant that the risk of a true Financing Failure was remote. The RTF was ultimately agreed to at the 5% level (rather than the 6% initially proposed by Veridian) precisely because the parties recognized that Penterra had the independent resources to close even without the committed debt. The RTF was a backstop against the narrow risk that the lenders would not perform — not a general hedge against any outcome in which the deal did not close.

D. Veridian's Anticipated Counter-Arguments and Responses

Based on Veridian's demand letter dated October 15, 2024, and the positions articulated by Zalcourt Archer & Cole LLP in prior correspondence, we anticipate that Veridian may advance the following arguments in support of an RTF claim. We address each in turn.

1. Argument: Penterra's Termination Was Pretextual; the True Reason Was Unwillingness to Fund

Veridian may argue — and, indeed, has already suggested in its demand letter — that Penterra's assertion of an MAE is pretextual and that the true reason for Penterra's termination was "buyer's remorse." On this theory, Veridian would contend that because Penterra simply did not want to proceed with the Transaction (rather than being genuinely unable to close due to condition failure), the RTF should apply as though Penterra had refused to fund the purchase price.

Response. This argument fails for several independent reasons.

First, the RTF is triggered by the legal basis for termination under the SPA — not by a court's subjective assessment of the Buyer's motivation or state of mind. Penterra terminated under Section 8.1(d). That is a fact. Section 8.2(b) does not reference Section 8.1(d). That is also a fact. No amount of speculation about Penterra's motivations can transform a Section 8.1(d) termination into a Section 8.1(e) or Section 8.1(b) termination. The SPA's termination architecture is a closed system: each termination right has specific triggers, and the corresponding termination fee provisions are keyed to those specific triggers. If a party terminates under a particular provision, the consequences of that termination are governed by the SPA provisions that reference that particular termination trigger.

Second, Penterra's MAE position is well-supported on the merits. The adverse Marlowe Asset Management-2 Phase II clinical data and the FDA partial clinical hold are not trivial or marginal developments. A Grade ≥3 CRS rate of 23.4% (compared to 4.1% in the control arm), seven treatment-related deaths (3.6%), and a non-statistically significant efficacy signal represent a fundamental impairment of VRD-4187's clinical and commercial viability. We refer to our comprehensive MAE analysis memorandum dated August 25, 2024, the supplemental analysis dated September 2, 2024, and the independent clinical assessment prepared by Dr. Raymond Kapoor of Broadleaf Scientific Consulting LLC dated August 19, 2024, each of which provides detailed support for the MAE determination. There is nothing pretextual about Penterra's position.

Third, even if a court were ultimately to disagree with Penterra's MAE determination — a possibility that cannot be excluded given the inherently fact-intensive nature of MAE analysis under Delaware law — the remedy available to Veridian would be specific performance under SPA Section 10.12 (compelling Penterra to close) or, in the alternative, expectation damages, not the RTF. The RTF has its own separate and narrower trigger mechanism. A finding that no MAE occurred does not, by some alchemical process, convert a Section 8.1(d) termination into a Financing Failure. It would mean that Penterra's termination was invalid — not that the termination was caused by financing unavailability. In such a scenario, Veridian's remedy would be equitable or compensatory relief for wrongful termination, governed by Sections 8.3 and 10.12, not the RTF provision of Section 8.2(b).

2. Argument: The RTF Should Apply Because the Financing Conditions Were Not Satisfied

A more sophisticated argument that Veridian may advance is that the conditions precedent to the lenders' funding obligations under the Commitment Letter incorporated or mirrored the SPA's closing conditions, and that by asserting an MAE, Penterra effectively caused the financing conditions to fail — thereby creating a Financing Failure that triggers the RTF.

Response. This argument conflates two distinct concepts and should be rejected.

The RTF applies when the Buyer's failure to close is caused by the lenders' refusal or inability to fund their commitments. It does not apply when the Buyer, for reasons unrelated to the Financing, exercises a contractual right not to close — even if, hypothetically, the lenders' conditions to funding might also not have been satisfied as a consequence of the same underlying events.

To illustrate: it is true that the conditions precedent to funding under the Commitment Letter include a "SPA Rep Condition" requiring that the representations and warranties of the Sellers under the SPA be true and correct, and a "No MAE Condition" requiring that no MAE shall have occurred. These conditions in the Commitment Letter are parallel to (and, in fact, slightly less demanding than) the closing conditions in SPA Sections 7.2(a) and 7.2(b). It is therefore conceivable that, had Penterra attempted to draw on the facility, the lenders might have taken the position that their conditions to funding were not satisfied by reason of the same Marlowe Asset Management-2 data and FDA action.

But this hypothetical is irrelevant. The RTF is not triggered by a hypothetical financing failure; it is triggered by an actual Financing Failure — that is, by the Buyer's actual failure to close that is actually caused by the actual unavailability of the Financing. Here, no attempt to draw on the Financing was made. The lenders did not refuse to fund. The commitment was not withdrawn. Penterra terminated the SPA under Section 8.1(d) based on the MAE, and then separately terminated the Commitment Letter the following day. The chain of causation runs from the MAE to the termination; it does not run through any financing deficiency.

Moreover, the conditions to funding under the Commitment Letter are conditions for the benefit of the lenders — they exist to protect Summit Ridge and Ironclad from being required to fund a loan when the underlying acquisition target has experienced a material deterioration. They are not a mechanism to convert a buyer-side termination based on an MAE into a Financing Failure for purposes of triggering the RTF. To accept Veridian's argument would be to hold that any time a buyer terminates an SPA due to an MAE — where the committed financing also includes a parallel MAE condition — the buyer is subject to the RTF. Such a reading would effectively convert the RTF from a financing-specific remedy into a universal termination fee, which is contrary to the provision's plain language, its negotiated purpose, and the structural logic of the SPA.

3. Argument: The RTF Caps Buyer's Liability in Any Termination Scenario

Finally, Veridian may argue that Section 8.2(b) was intended to function as a cap on Penterra's total monetary exposure in any scenario where the Transaction does not close — essentially, that the RTF of $45,000,000 represents the maximum amount Penterra could ever owe as a consequence of the deal's failure.

Response. This argument is contrary to the SPA's express terms and would produce absurd results under established principles of Delaware contract interpretation.

Section 8.2(b) is clear that the RTF is the "sole and exclusive remedy" of the Sellers only "in the event of a termination described in this Section 8.2(b)" — i.e., only in the event of a Financing Failure. It is not described as the sole and exclusive remedy in all termination scenarios. The exclusive-remedy language is tied to the Financing Failure context, not to termination generally.

In the event of a non-Financing Failure termination — such as the present case — the parties' respective rights and remedies are governed by the general effect-of-termination provision (Section 8.3) and the specific performance provision (Section 10.12). Section 10.12 provides that either party may seek specific performance of the other party's obligations under the SPA, including the Buyer's obligation to consummate the closing if all conditions have been satisfied. Section 8.3 preserves liability for willful and material breach. These provisions exist as independent remedial frameworks that are available to the Sellers in appropriate circumstances.

To read the RTF as a cap on all buyer liability — regardless of the termination trigger — would render Section 10.12 (specific performance) and the willful-breach proviso in Section 8.3 superfluous. A court would never order specific performance to compel a closing (or award damages in lieu thereof) if the Buyer's maximum exposure were capped at $45,000,000 in all circumstances. Yet the parties plainly intended specific performance to be available, as evidenced by the inclusion of Section 10.12 and the extensive negotiation that surrounded that provision. Under the well-established Delaware canon that all provisions of a contract must be given effect and no provision should be rendered superfluous, see DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005); Kuhn Constr. Co. v. Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010), Veridian's reading must be rejected.

The proper interpretation is that the SPA establishes a tiered remedial framework: (a) in the event of a Financing Failure, the RTF is the Sellers' sole and exclusive remedy (capping the Buyer's exposure at $45,000,000); (b) in the event of a non-Financing Failure termination where the Buyer is not in breach, the SPA terminates with no further liability (Section 8.3); and (c) in the event of a non-Financing Failure termination where the Buyer has willfully and materially breached or where the Buyer has failed to close despite all conditions being satisfied for a reason other than financing unavailability, specific performance and/or expectation damages are available (Sections 8.3 and 10.12). This reading gives effect to all provisions of the SPA and reflects a coherent risk-allocation framework.

V. Implications for Anticipated Litigation

A. Veridian's Demand Letter (October 15, 2024)

As noted in Section II.C above, Veridian's demand letter dated October 15, 2024, sent by Zalcourt Archer & Cole LLP (Rebecca Whitmore), threatens litigation in the Court of Chancery of the State of Delaware, which has exclusive jurisdiction over disputes arising under the SPA pursuant to Section 10.6. Delaware law governs the SPA pursuant to Section 10.5.

The demand letter outlines Veridian's anticipated claims, which include: (i) a claim for specific performance under SPA Section 10.12 to compel Penterra to consummate the closing; (ii) alternatively, a claim for expectation damages, which Veridian characterizes as the difference between the $900,000,000 purchase price and the current fair market value of Veridian's equity (a figure Veridian has not specified but which, given the adverse clinical developments, is likely to be substantially lower than the purchase price); and (iii) a claim for the $45,000,000 RTF, asserted as an alternative or fallback position to the specific performance and damages claims.

Based on the demand letter's references to Veridian's litigation counsel's anticipated timeline, we expect a complaint to be filed in the Court of Chancery on or about November 15, 2024. The anticipated caption would be Veridian Biosciences, Inc. v. Penterra Pharmaceuticals Corp., C.A. No. 2024-_ (Del. Ch.).

It bears noting that the simultaneous assertion of a specific performance claim and an RTF claim creates a logical tension in Veridian's position. The RTF, by its terms, is the Sellers' "sole and exclusive remedy" in a Financing Failure scenario — meaning that if the RTF applies, Veridian cannot also seek specific performance or expectation damages. Conversely, if Veridian seeks specific performance (which it can only do if the RTF does not apply, i.e., if there was no Financing Failure), then the RTF claim is necessarily foreclosed. Veridian's decision to plead both claims in the alternative is understandable as a matter of litigation strategy, but the internal inconsistency of the two claims reinforces the conclusion that the RTF is a financing-specific remedy that does not apply in the circumstances of this case.

B. Penterra's Defensive Posture on the RTF

If Veridian includes an RTF claim in its anticipated complaint, Penterra's defense is straightforward and, in our view, compelling: the RTF provision's plain language limits its application to Financing Failure scenarios as defined in Section 8.2(b), and no Financing Failure occurred. The Financing remained available. Penterra terminated under Section 8.1(d), which is not an RTF-triggering provision. The RTF is not payable.

This defense is notably independent of the merits of the MAE dispute. That is, even if the Court of Chancery were ultimately to conclude that the Marlowe Asset Management-2 data and FDA partial clinical hold did not constitute a material adverse effect under the SPA's definition — a determination we believe would be erroneous but which we cannot exclude as a possibility — the RTF would still be inapplicable because the Financing was available throughout the relevant period. The MAE dispute affects whether Penterra's termination was valid; it does not affect whether the RTF is triggered. These are separate questions governed by separate contractual provisions.

Given the clarity of the contractual language, the RTF inapplicability issue is likely to be suitable for early dispositive motion practice in any Delaware Chancery proceeding. The question is one of pure contract interpretation and does not require extensive discovery. We would recommend raising the issue at the earliest procedural opportunity — potentially in a motion for partial summary judgment or a motion to dismiss the RTF count of Veridian's complaint — to eliminate the $45,000,000 RTF claim from the case early in the proceedings. This approach would narrow the litigation to the core MAE dispute and the associated specific performance/damages claims.

C. Relationship to Specific Performance and Damages Claims

The RTF analysis is distinct from, and does not resolve, Veridian's specific performance claim under SPA Section 10.12. The specific performance question turns on whether the closing conditions in Sections 7.2(a) and 7.2(b) were, in fact, satisfied (or would have been satisfied but for Penterra's invalid termination). If the court finds that an MAE did not occur and that all closing conditions were satisfied (or would have been satisfied absent Penterra's termination), Veridian's remedy would be specific performance — an order compelling Penterra to consummate the closing — or, if specific performance is impracticable or inequitable, damages in lieu thereof. The RTF would not be the remedy in this scenario because the non-closing was not caused by a Financing Failure.

Conversely, if the court finds that an MAE did occur and that Penterra validly terminated the SPA under Section 8.1(d), then neither specific performance nor the RTF would be available to Veridian. Penterra would have exercised a legitimate contractual right, and the SPA would have been validly terminated with no further liability other than the surviving provisions under Section 8.3.

The RTF would only be relevant in a narrow, hypothetical scenario that did not occur and cannot occur on these facts: a scenario in which (a) all closing conditions were satisfied, (b) the Buyer failed to close, and (c) the Buyer's failure to close was caused by the unavailability of the committed debt financing. Because none of these predicate conditions is met, the RTF is a dead letter in this dispute.

This analysis has an important strategic implication: by eliminating the RTF as a viable claim, Penterra can focus its litigation resources on the central MAE question, which is the battleground on which this case will be won or lost. If Penterra prevails on the MAE question, all of Veridian's claims fail. If Penterra does not prevail on the MAE question, Veridian's remedy is specific performance or damages under Sections 10.12 and 8.3 — a significant exposure, to be sure, but one that does not include the RTF.

VI. Penterra's Sunk Transaction Costs (Contextual Reference)

For completeness, and to provide context for the Board and management's understanding of Penterra's overall financial exposure in connection with the terminated Transaction, we set forth below a su

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, NY 10166
October 10, 2024
MEMORANDUM
PRIVILEGE LEGEND: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of Penterra Pharmaceuticals Corp. It is intended solely for the use of the addressee and the individuals copied hereon in connection with the above-referenced matter. This memorandum contains legal advice and mental impressions of counsel. It should not be disclosed, distributed, or otherwise made available to any third party without the prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
I. Executive Summary
This memorandum analyzes whether the $45,000,000 reverse termination fee (the "RTF") provided for under Section 8.2(b) of the Stock Purchase Agreement (the "SPA"), dated June 10, 2024, among Penterra Pharmaceuticals Corp. ("Penterra" or the "Buyer"), Veridian Biosciences, Inc. ("Veridian" or the "Company"), the Sellers listed therein, and David Ng, acting in his capacity as the Stockholder Representative, is payable by Penterra following its termination of the SPA on September 30, 2024.
For the reasons set forth in detail below, it is our conclusion that the RTF is not payable. The RTF provision, properly construed under its plain terms and the overall architecture of the SPA, is triggered exclusively by a "Financing Failure" — that is, the Buyer's failure to consummate the closing due to the unavailability of the committed debt financing described in the Commitment Letter. Penterra's termination of the SPA was not the result of a Financing Failure. Rather, Penterra exercised its termination right under SPA Section 8.1(d) on the independent and well-supported ground that the conditions to Buyer's obligation to close under Sections 7.2(a) and 7.2(b) were not satisfied — and were incapable of being satisfied prior to the Outside Date — due to the occurrence of a material adverse effect ("MAE") relating to (i) the adverse Phase II clinical trial data for VRD-4187 reported by the Marlowe Asset Management-2 Data Monitoring Committee on August 14, 2024, and (ii) the FDA's imposition of a partial clinical hold on VRD-4187 (IND 154832) on August 22, 2024.
At no time prior to or following termination did the $500,000,000 committed senior secured term loan facility from Summit Ridge Capital Partners, LP ("Summit Ridge") and Ironclad Trust Company, N.A. ("Ironclad") (Commitment Letter Ref. CL-2024-PPCA-0607, dated June 7, 2024) (the "Commitment Letter" and the "Financing") become unavailable. The lenders did not withdraw, reduce, modify, or indicate any inability or unwillingness to fund their commitments. The Financing remained in full force and effect through the date of termination and was terminated only upon Penterra's voluntary notice to Ironclad dated October 1, 2024 — the day following Penterra's termination of the SPA. The Financing was not drawn solely because Penterra exercised its contractual right not to close. There was no Financing Failure.
Moreover, Penterra's cash on hand as of Q2 2024 — approximately $2.1 billion — was more than sufficient to fund the entire $900,000,000 purchase price independently, without any recourse to debt financing. This fact further underscores that the non-closing had nothing to do with financing availability.
Recommendation. We recommend that Penterra be prepared to vigorously defend against any claim by Veridian or the Stockholder Representative (David Ng, acting on behalf of Crestline Ventures, LP) that the RTF is owed. As a threshold matter, Penterra should immediately take steps to preserve all documentation — including communications with Summit Ridge and Ironclad, internal treasury records, and board materials — establishing the continued availability of the Financing through and beyond the termination date. The RTF inapplicability argument is a straightforward question of contract interpretation under Delaware law and should be suitable for early dispositive motion practice in any anticipated litigation.
II. Background and Procedural History
A. The Transaction
On June 10, 2024, Penterra entered into a definitive Stock Purchase Agreement to acquire 100% of the outstanding capital stock of Veridian Biosciences, Inc. for an aggregate cash purchase price of $900,000,000 (the "Transaction"). The SPA was executed by Penterra, Veridian, the stockholders of Veridian identified on the signature pages thereto (the "Sellers"), and David Ng, in his capacity as the Stockholder Representative.
Veridian is a privately held, clinical-stage biotechnology company focused on immuno-oncology therapeutics, incorporated under the laws of the State of Delaware and headquartered at 550 Gateway Drive, Cambridge, Massachusetts 02142. Veridian's primary asset and the principal driver of the Transaction is its lead drug candidate, VRD-4187, a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3") for the treatment of small cell lung cancer ("SCLC"). At the time of signing, VRD-4187 was in a Phase II clinical trial designated Marlowe Asset Management-2 (ClinicalTrials.gov Identifier: NCT05837291). Veridian is a pre-revenue company; for its fiscal year ended December 31, 2023, it reported no product revenue and a net loss of approximately $87.3 million. Veridian's operations have been funded principally through venture capital financing led by Crestline Ventures, LP.
Penterra is a publicly traded specialty pharmaceutical company listed on the Nasdaq Global Select Market under the ticker symbol "PPCA." It is incorporated under the laws of the State of Delaware and headquartered at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540. As of June 2024, Penterra had a market capitalization of approximately $14.2 billion, reported fiscal year 2023 revenue of approximately $4.87 billion, and maintained cash and cash equivalents on hand of approximately $2.1 billion as of the end of the second quarter of 2024. Penterra's acquisition of Veridian was intended to bolster its oncology pipeline with VRD-4187 as a potential first-in-class therapy for SCLC.
The Transaction was negotiated over a period of approximately four months, with initial indications of interest exchanged in February 2024 and exclusivity granted to Penterra in April 2024. Penterra's financial advisor on the Transaction was Garrison Zanthor & Co., LLC, led by Kevin Driscoll, Managing Director. Veridian's financial advisor was Ridgeway Partners LLC, led by Laura Beckett, Managing Director. Penterra was represented by this firm, Calderwood & Harkness LLP. Veridian and the Sellers were represented by Zalcourt Archer & Cole LLP, with Rebecca Whitmore serving as lead partner.
B. Financing Structure
The $900,000,000 cash purchase price was to be funded through a combination of (i) $500,000,000 in proceeds from a committed senior secured term loan facility (the "Term Loan Facility") and (ii) approximately $400,000,000 from Penterra's existing cash on hand.
The Term Loan Facility was the subject of a commitment letter (the "Commitment Letter"), executed on June 7, 2024 (Reference: CL-2024-PPCA-0607), by and among Summit Ridge Capital Partners, LP, as lead arranger and bookrunner, and Ironclad Trust Company, N.A., as administrative agent and a lender. The Commitment Letter provided for a $500,000,000 senior secured term loan bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 225 basis points, with a maturity of seven years.
The economic terms of the Commitment Letter included a commitment fee of 0.35% per annum on unfunded commitments (amounting to $1,750,000 per annum, or approximately $4,795 per day) and a ticking fee of 0.175% per annum, commencing 90 days after the signing of the SPA (i.e., beginning September 8, 2024). The ticking fee was designed to compensate the lenders for the continued reservation of capital in the event the closing was delayed beyond the initial 90-day period. The financing commitment was co-terminous with the SPA's Outside Date of December 10, 2024, meaning the lenders' obligations to fund would expire automatically if the closing had not occurred by that date.
It is critical to note, as described in greater detail below, that Penterra's Q2 2024 cash on hand of approximately $2.1 billion was more than sufficient to fund not only the $400,000,000 cash portion of the purchase price but, indeed, the entire $900,000,000 purchase price without any resort to the committed debt financing. The Term Loan Facility was utilized as part of Penterra's capital allocation strategy to preserve balance sheet flexibility and was supplemental — not essential — to Penterra's ability to consummate the Transaction.
C. Key Post-Signing Events and Termination
The period following execution of the SPA was marked by significant adverse developments with respect to Veridian's lead drug candidate, VRD-4187, which ultimately gave rise to Penterra's termination of the SPA. The key events are as follows:
August 14, 2024 — Marlowe Asset Management-2 Data Monitoring Committee Interim Analysis. The independent Data Monitoring Committee ("DMC") for the Marlowe Asset Management-2 Phase II clinical trial conducted a pre-planned interim analysis of safety and efficacy data. The DMC findings were alarming. The DMC recommended a suspension of enrollment in the trial based on the following key findings: (a) the incidence of Grade 3 or higher cytokine release syndrome ("CRS") in the VRD-4187 treatment arm was 23.4%, compared to 4.1% in the control arm — a rate approximately five to six times higher than anticipated in the trial's statistical analysis plan and substantially in excess of the rates reported in the Phase I dose-escalation study; (b) there were seven treatment-related deaths in the VRD-4187 arm (3.6% of enrolled subjects), compared to one treatment-related death in the control arm (0.5%); and (c) the overall response rate ("ORR") for VRD-4187 was 31.4%, which was not statistically significant compared to the control arm's ORR of 28.9% (p = 0.58). The combination of a dramatically elevated safety signal and a non-significant efficacy signal fundamentally undermined the clinical and commercial viability of VRD-4187.
August 16, 2024 — Disclosure to Penterra. Penterra received formal notice of the DMC findings from Veridian pursuant to SPA Section 5.1(b), which required Veridian to promptly notify Penterra of any material development relating to the Company's business, operations, or assets, including any material development in any clinical trial or regulatory proceeding.
August 19, 2024 — Supplemental Clinical Assessment. Broadleaf Scientific Consulting LLC ("Broadleaf"), Penterra's independent clinical due diligence advisor, delivered a supplemental clinical assessment to Penterra evaluating the DMC findings (prepared by Dr. Raymond Kapoor, Ph.D., Managing Principal). The Broadleaf assessment concluded that the safety profile of VRD-4187 at the 1.5 mg/kg dose was inconsistent with a commercially viable therapeutic index and that the FDA was likely to impose regulatory action on the clinical program.
August 22, 2024 — FDA Partial Clinical Hold. The U.S. Food and Drug Administration ("FDA") imposed a partial clinical hold on VRD-4187 under Investigational New Drug Application No. 154832 ("IND 154832"). The partial clinical hold prohibited new patient enrollment in the Marlowe Asset Management-2 trial and required Veridian to submit a comprehensive response addressing the safety concerns, including a revised protocol with dose modifications and enhanced CRS mitigation measures, before enrollment could resume.
August 28, 2024 — Protocol Amendment. Veridian implemented a protocol amendment (Protocol v4.0) to Marlowe Asset Management-2, incorporating mandatory tocilizumab prophylaxis for all treated patients and reducing the VRD-4187 dose from 1.5 mg/kg to 0.75 mg/kg. While these measures were responsive to the safety concerns, they significantly altered the clinical development path and timeline for VRD-4187, with uncertain implications for efficacy at the reduced dose level.
September 6, 2024 — Deficiency Notice. Penterra, through this firm, delivered a formal Deficiency Notice to Veridian alleging that a material adverse effect had occurred within the meaning of SPA Section 1.1 and that, as a consequence, the conditions to Buyer's obligation to close under Sections 7.2(a) and 7.2(b) were not satisfied and could not reasonably be expected to be satisfied prior to the Outside Date. The Deficiency Notice set forth the factual basis for Penterra's position in detail, including the DMC findings, the FDA partial clinical hold, the Broadleaf assessment, and an analysis of the commercial implications of the dose reduction protocol.
September 13, 2024 — Veridian's Response. Veridian, through Zalcourt Archer & Cole LLP, responded to the Deficiency Notice, disputing that an MAE had occurred. Veridian's position, in essence, was that (i) the adverse clinical data fell within the MAE carveouts for conditions affecting the biotechnology and pharmaceutical industries generally; (ii) the Phase II data, while disappointing, did not rise to the level of an MAE under Delaware law's demanding standard; and (iii) Penterra was obligated to proceed to closing. Veridian's response demanded that Penterra consummate the closing in accordance with the SPA.
September 27, 2024 — Board Authorization of Termination. The Penterra Board of Directors, chaired by Margaret Liu Whitfield, convened a special meeting to consider the status of the Veridian Transaction. After reviewing presentations from management, this firm, Garrison Zanthor & Co., and Broadleaf Scientific Consulting, the Board unanimously authorized the termination of the SPA on the grounds that a material adverse effect had occurred and that the conditions to Buyer's obligation to close could not be satisfied prior to the Outside Date.
September 30, 2024 — Termination Notice. Penterra, through this firm, delivered a formal Termination Notice to Veridian, the Sellers, and the Stockholder Representative pursuant to SPA Section 8.1(d), terminating the SPA effective immediately. The Termination Notice stated that Penterra was exercising its right to terminate the SPA on the grounds that the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) had not been satisfied and were incapable of being satisfied prior to the Outside Date of December 10, 2024, due to the occurrence of a material adverse effect.
October 1, 2024 — Termination of Financing Commitment. Calderwood & Harkness LLP, on behalf of Penterra, sent a notice to Ironclad Trust Company, N.A. (attention: Samantha Hwang, Vice President, Loan Administration) requesting termination of the $500,000,000 commitment under the Commitment Letter. This termination was a voluntary act by Penterra, taken the day after the SPA was terminated. The lenders acknowledged the termination without objection.
October 15, 2024 — Veridian's Demand Letter. Veridian, through Zalcourt Archer & Cole LLP (Rebecca Whitmore), sent a demand letter to Penterra threatening litigation in the Court of Chancery of the State of Delaware. The demand letter asserted that Penterra's termination was invalid, demanded that Penterra proceed to closing, and stated that Veridian intended to seek specific performance and, alternatively, damages. The demand letter also referenced the RTF, asserting that at a minimum, Penterra owed the $45,000,000 RTF to the Sellers. It is this latter assertion — the claim that the RTF is payable — that is the subject of this memorandum.
III. Relevant SPA Provisions
This Section sets forth the SPA provisions relevant to the RTF analysis, together with our interpretive commentary. We analyze these provisions in light of their plain language, the internal architecture of the SPA, and established principles of Delaware contract interpretation.
A. Section 8.1 — Termination Rights
Article VIII of the SPA governs the parties' respective termination rights. Section 8.1 sets forth five distinct termination provisions, each triggered by different factual predicates. The following subsections are relevant to our analysis:
Section 8.1(b) — Outside Date Termination. Section 8.1(b) permits either party to terminate the SPA if the closing has not occurred by the Outside Date, which is defined as December 10, 2024 (i.e., 180 days following the date of the SPA). This right is subject to the limitation that the terminating party may not exercise it if the failure of the closing to occur by the Outside Date was primarily caused by such party's material breach of the SPA. This provision serves as a "drop-dead date" mechanism, ensuring that neither party remains bound indefinitely. Penterra did not invoke Section 8.1(b).
Section 8.1(c) — Termination for Breach by Sellers. Section 8.1(c) permits the Buyer to terminate the SPA if the Sellers are in material breach of any of their representations, warranties, or covenants contained in the SPA, and such breach would cause the conditions to Buyer's obligation to close set forth in Section 7.2 not to be satisfied, and such breach is not cured within 30 calendar days following delivery of written notice of such breach to the Sellers. Penterra did not invoke Section 8.1(c) as the basis for termination, although the Deficiency Notice dated September 6, 2024, referenced certain representation concerns in addition to the MAE claim.
Section 8.1(d) — Termination for Failure of Buyer's Closing Conditions. Section 8.1(d) permits the Buyer to terminate the SPA if the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) have not been satisfied and, in the reasonable judgment of the Buyer, are incapable of being satisfied prior to the Outside Date. This is the provision under which Penterra terminated the SPA. The provision operates as a "condition failure" termination right, permitting the Buyer to exit the Transaction when the factual predicates for its closing obligation have failed and cannot be restored within the contractual timeframe.
Section 8.1(e) — Buyer's Closing Failure. Section 8.1(e) permits the Sellers to terminate the SPA if the Buyer fails to consummate the closing within five business days after all conditions to closing set forth in Sections 7.1 (conditions to the obligation of all parties) and 7.2 (conditions to the Buyer's obligation) have been satisfied or waived. This provision is denominated in the SPA as the "Buyer's Closing Failure" and represents the primary trigger mechanism for the RTF, as discussed in Section III.C below. Notably, Section 8.1(e) was not invoked by either party. The Sellers did not terminate the SPA at any time prior to Penterra's delivery of the Termination Notice on September 30, 2024.
The structural distinction among these termination rights is critical. Each provision addresses a different factual scenario, and the SPA's termination fee provisions (Sections 8.2(a) and 8.2(b)) are keyed to specific termination triggers — not to termination generally. As analyzed below, the RTF is triggered only by a termination under Section 8.1(e) or Section 8.1(b) under specified circumstances; it is not triggered by a termination under Section 8.1(d).
B. Section 7.2 — Conditions to Buyer's Obligation to Close
Section 7.2 of the SPA sets forth the conditions precedent to the Buyer's obligation to consummate the closing. The two conditions most relevant to this analysis are:
Section 7.2(a) — Accuracy of Representations and Warranties. Section 7.2(a) provides 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 the materiality and material adverse effect qualifiers set forth therein) as of the Closing Date as though made on and as of such date (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case it shall be true and correct as of such earlier date). Penterra's position is that certain of the Sellers' representations — including those relating to the conduct of Veridian's clinical trials in compliance with applicable law and protocols, the accuracy of clinical data provided to Penterra, and the absence of material undisclosed liabilities — cannot be brought down as true and correct in light of the Marlowe Asset Management-2 developments.
Section 7.2(b) — No Material Adverse Effect. Section 7.2(b) provides that no material adverse effect shall have occurred since the date of the SPA (June 10, 2024) and be continuing as of the Closing Date. This condition is the centerpiece of Penterra's termination rationale. The occurrence of the adverse Phase II clinical data and the FDA partial clinical hold, taken together, constitute a material adverse effect within the meaning of the SPA, as analyzed in our prior memoranda dated August 25, 2024, and September 2, 2024.
Other conditions to closing set forth in Section 7.2 include, among others: (iii) receipt of HSR Act clearance (which was obtained on May 20, 2024, following early termination of the waiting period); (iv) delivery of the required stockholder consent (which was obtained on June 14, 2024, within four days of signing); (v) delivery of customary closing certificates; (vi) execution and delivery of the escrow agreement by the escrow agent; and (vii) delivery of a FIRPTA certificate. The non-satisfaction of conditions (iii) and (iv) is not at issue; those conditions were satisfied well in advance of the events giving rise to Penterra's termination.
C. Section 8.2(b) — Reverse Termination Fee
Section 8.2(b) of the SPA is the operative provision establishing the RTF. This is the provision that Veridian has asserted entitles the Sellers to a payment of $45,000,000 from Penterra. We set forth below a detailed textual analysis of this provision.
Section 8.2(b) provides, in relevant part:
In the event that (i) this Agreement is terminated by the Sellers pursuant to Section 8.1(e) as a result of the Buyer's failure to consummate the Closing due to the unavailability of the Financing, or (ii) this Agreement is terminated by either the Buyer or the Sellers pursuant to Section 8.1(b) and, at the time of such termination, all of the conditions to the Closing set forth in Sections 7.1 and 7.2 have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, each of which shall be capable of being satisfied at the Closing) and the Buyer has failed to consummate the Closing solely because the Financing has not been funded, then the Buyer shall pay to the Stockholder Representative (for distribution to the Sellers on a pro rata basis) a fee equal to $45,000,000 (the "Reverse Termination Fee") within three (3) business days following such termination by wire transfer of immediately available funds to an account designated in writing by the Stockholder Representative. The Reverse Termination Fee shall be the sole and exclusive remedy of the Sellers and the Stockholder Representative against the Buyer and its Affiliates in the event of a termination described in this Section 8.2(b), and in no event shall the Sellers, the Stockholder Representative, or any of their respective Affiliates seek or be entitled to any other monetary damages, equitable relief, or any other remedy against the Buyer or its Affiliates in connection with a Financing Failure.
Several features of this provision are critical to the analysis:
First, the RTF is payable only in two enumerated scenarios, each of which requires a specific termination trigger under Section 8.1:
Trigger (i): Termination by the Sellers under Section 8.1(e) (Buyer's Closing Failure) as a result of the Buyer's failure to close due to the unavailability of the Financing; or
Trigger (ii): Termination by either party under Section 8.1(b) (Outside Date) where (a) all closing conditions have been satisfied or waived and (b) the Buyer has failed to close solely because the Financing has not been funded.
Neither trigger is satisfied here. The SPA was terminated by the Buyer under Section 8.1(d), which is not referenced in either subsection of Section 8.2(b).
Second, both triggering clauses contain explicit causation language — "as a result of" and "due to the unavailability of the Financing" in Trigger (i), and "solely because the Financing has not been funded" in Trigger (ii). This language imposes a strict causal nexus between the non-closing and a financing deficiency. The RTF is not payable when the non-closing is attributable to any other cause, including the failure of Buyer's closing conditions due to an MAE.
Third, the RTF is expressly characterized as the "sole and exclusive remedy" of the Sellers in the event of a "Financing Failure." The use of the defined concept "Financing Failure" — which the provision employs as a shorthand for the scenarios described in Triggers (i) and (ii) — confirms that the RTF is a limited-purpose remedy designed to address a specific risk allocation concern: the risk that the Buyer's committed lenders will fail to fund their obligations, thereby preventing the Buyer from consummating an acquisition it is otherwise willing and contractually required to complete. The RTF amount of $45,000,000 (representing 5% of the $900,000,000 purchase price) was negotiated as the measure of the Sellers' damages in such a scenario, recognizing that in a financing failure, the Sellers would bear a loss without having had any direct relationship with or recourse against the Buyer's lenders.
Fourth, the RTF does not apply to a termination under Section 8.1(d), which is the provision Penterra invoked. This omission is neither accidental nor ambiguous. The SPA's termination architecture carefully delineates the consequences of termination under each provision. The exclusion of Section 8.1(d) from the RTF triggers reflects the parties' negotiated allocation of risk: if the Buyer terminates because its closing conditions have failed (as opposed to failing to close when conditions are satisfied), the RTF does not apply. In such a scenario, the Sellers' rights and remedies are governed by the general effect-of-termination provision (Section 8.3) and the specific performance provision (Section 10.12), as applicable.
D. Section 8.2(a) — Target Termination Fee (Comparison)
By contrast to the RTF, Section 8.2(a) establishes a "Target Termination Fee" of $36,000,000 (representing 4% of the $900,000,000 purchase price) payable by the Sellers to the Buyer in the event that the SPA is terminated as a result of a breach by Veridian of the no-shop provision set forth in Section 5.4 — specifically, if Veridian engaged in prohibited solicitation of, or entered into negotiations or discussions with, a third party regarding an alternative acquisition proposal in violation of its exclusivity obligations.
The comparison between Section 8.2(a) and Section 8.2(b) is instructive. Each termination fee provision is triggered by a specific, enumerated event: the Target Termination Fee is triggered by a violation of the no-shop obligation, while the RTF is triggered by a Financing Failure. Neither fee operates as a general "break fee" or "walk-away fee" payable upon any termination of the SPA. The parallel structure of the two fee provisions highlights the parties' clear intent that each termination fee is a tailored remedy tied to a particular breach or failure scenario — not a default consequence of any termination.
This structural parallelism is relevant because it rebuts any argument that the RTF was intended as a general cap on Buyer's liability or as a fee payable in any circumstance where the Buyer does not close. If the parties had intended such a result, they would not have carefully limited the RTF's triggers to the specific Financing Failure scenarios described in Section 8.2(b).
E. Section 8.3 — Effect of Termination
Section 8.3 provides that upon a valid termination of the SPA in accordance with Section 8.1, the SPA shall become void and of no further force or effect, and there shall be no liability on the part of any party hereto, except that the following provisions shall survive termination: (i) the confidentiality obligations set forth in Section 5.3; (ii) the termination fee provisions of Section 8.2; (iii) the governing law and jurisdiction provisions of Sections 10.5 and 10.6; (iv) the waiver of jury trial provision of Section 10.7; and (v) this Section 8.3 itself.
Critically, Section 8.3 includes a proviso that the foregoing limitation on liability shall not relieve any party from liability for damages arising from a "willful and material breach" of the SPA. This "carve-out" for willful and material breach ensures that a party cannot intentionally sabotage a transaction and then claim the protection of the effect-of-termination provision.
The import of Section 8.3 for the present analysis is as follows: if the RTF is not triggered (as we conclude it is not), then upon Penterra's valid termination under Section 8.1(d), the SPA is void and Penterra has no further liability to Veridian or the Sellers, except (a) as provided by the surviving provisions (none of which impose affirmative payment obligations on Penterra in this scenario) and (b) in the event of a willful and material breach, which Penterra has not committed. Penterra's liability upon a valid termination is thus limited to the surviving provisions, and Veridian's sole recourse — if it disputes the validity of the termination — is to challenge the MAE determination, not to claim the RTF.
F. Definition of "Material Adverse Effect" — SPA Section 1.1
Although a comprehensive analysis of whether an MAE occurred is beyond the scope of this memorandum (and is addressed in our prior memoranda dated August 25, 2024, and September 2, 2024), a brief summary of the MAE definition is necessary for context, as the validity of Penterra's termination under Section 8.1(d) depends on the occurrence of an MAE.
Section 1.1 of the SPA defines "Material Adverse Effect" as:
any event, change, development, occurrence, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, results of operations, financial condition, or assets of the Company, taken as a whole, or (b) the ability of the Sellers to consummate the Transactions contemplated by this Agreement.
The definition includes a series of exclusions (commonly referred to as "carveouts") providing that none of the following shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect:
(i) changes in general economic, regulatory, or political conditions;
(ii) changes in conditions generally affecting the biotechnology or pharmaceutical industries;
(iii) changes in applicable law or in accounting standards (including GAAP);
(iv) epidemics, pandemics, or disease outbreaks (including COVID-19);
(v) natural disasters, acts of God, acts of war, armed hostilities, sabotage, or terrorism;
(vi) changes in financial, banking, or securities markets generally (including any disruption thereof); or
(vii) the announcement or pendency of the Transactions contemplated by this Agreement.
Each of carveouts (i) through (vi) is subject to a "disproportionate impact" exception: the carveout does not apply if the relevant event, change, or condition has a disproportionate adverse effect on the Company relative to other companies operating in the biotechnology industry of comparable size and stage of development. Carveout (vii) is not subject to the disproportionate impact exception.
For purposes of this memorandum, the salient point is that Penterra's position — that the Marlowe Asset Management-2 Phase II data and the FDA partial clinical hold constitute an MAE — is based on events that are specific to Veridian and VRD-4187, rather than on conditions generally affecting the biotechnology industry. The adverse safety signal (23.4% Grade ≥3 CRS, seven treatment-related deaths) and the resulting FDA partial clinical hold are company-specific events that go to the heart of Veridian's sole material asset. As such, the industry-wide carveout in clause (ii) does not apply to shield these events from the MAE determination, and even if it did, the disproportionate impact exception would reinstate them.
IV. Analysis: The RTF Is Not Triggered
Having set forth the relevant background and contractual provisions, we turn to the core analysis. For the reasons discussed below, we conclude that the RTF under SPA Section 8.2(b) is not payable by Penterra.
A. Penterra's Termination Was Pursuant to Section 8.1(d), Not Section 8.1(e) or Section 8.1(b)
The threshold and most dispositive point is straightforward: Penterra terminated the SPA pursuant to Section 8.1(d), and Section 8.1(d) is not a triggering provision for the RTF under Section 8.2(b).
As described in Section II.C above, Penterra delivered its Termination Notice on September 30, 2024, expressly invoking Section 8.1(d) of the SPA. The Termination Notice stated that the conditions to Buyer's obligation to close set forth in Sections 7.2(a) and 7.2(b) had not been satisfied and were incapable of being satisfied prior to the Outside Date of December 10, 2024, due to the occurrence of a material adverse effect. The Termination Notice did not reference any inability to fund the purchase price or any deficiency in the Financing.
The termination was not a "Buyer's Closing Failure" under Section 8.1(e). Penterra did not fail to close after all conditions to closing had been satisfied or waived. To the contrary, Penterra's position — supported by extensive legal, clinical, and financial analysis — is that the conditions to closing in Sections 7.2(a) and 7.2(b) were not satisfied, due to the occurrence of an MAE and the inability to bring down the Sellers' representations as true and correct. The predicate for a Buyer's Closing Failure — that all conditions have been satisfied and the Buyer has nevertheless failed to consummate the closing — was absent.
Nor did the termination occur under Section 8.1(b) (Outside Date). The Outside Date under the SPA is December 10, 2024. Penterra's termination occurred on September 30, 2024 — more than two months before the Outside Date. There was no termination on the Outside Date, and there is no basis for treating the termination as if it had occurred under Section 8.1(b).
Because neither RTF trigger clause in Section 8.2(b) — Trigger (i) (termination under Section 8.1(e) due to a Financing Failure) nor Trigger (ii) (termination under Section 8.1(b) where all conditions are satisfied but Financing has not been funded) — is applicable, the RTF is not payable.
Under established principles of Delaware contract law, the plain language of a negotiated agreement is the best evidence of the parties' intent. See Salamone v. Gorman, 106 A.3d 354, 367–68 (Del. 2014); Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006). Where contract language is clear and unambiguous, courts will give effect to the parties' intent as reflected in the express terms of the agreement without resort to extrinsic evidence. See Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). Here, Section 8.2(b) identifies the RTF triggers with specificity: termination under Section 8.1(e) or Section 8.1(b), in each case requiring a Financing Failure. Section 8.1(d) is simply not among the enumerated triggers. The absence of any reference to Section 8.1(d) in Section 8.2(b) is dispositive under the plain-language canon.
B. No Financing Failure Occurred
Even if one were to look beyond the specific termination provision invoked and examine whether a Financing Failure occurred — which, under the SPA's plain language, is unnecessary given that the threshold requirement of the correct termination trigger has not been met — the answer is unequivocally no.
The committed term loan facility of $500,000,000 under the Commitment Letter (Ref. CL-2024-PPCA-0607) remained in full force and effect through the termination date of September 30, 2024. At no point did Summit Ridge Capital Partners, LP (Philip Ostrander, Managing Director) or Ironclad Trust Company, N.A. (Samantha Hwang, Vice President) withdraw, reduce, amend, or modify their commitments, nor did either lender indicate any inability or unwillingness to fund the term loan. The Commitment Letter, by its terms, was co-terminous with the SPA Outside Date of December 10, 2024, and the lenders' funding obligations remained operative through that date.
Penterra did not draw on the facility because it exercised its contractual right to terminate the SPA prior to closing. The non-drawing was a consequence of Penterra's decision not to proceed with the Transaction, not a consequence of any deficiency in the Financing. The Financing was not drawn because the closing did not occur; the closing did not occur because Penterra validly terminated under Section 8.1(d) based on an MAE. There is a clear and critical distinction between (a) a buyer that cannot close because its financing has failed (a Financing Failure) and (b) a buyer that does not close because its closing conditions have not been satisfied (a condition-failure termination). This distinction is precisely what Section 8.2(b) was designed to capture.
The continued availability of the Financing is confirmed by objective evidence. Penterra's commitment fee obligations under the Commitment Letter continued to accrue throughout the pre-termination period. Specifically, the commitment fee accrued from June 7, 2024 (the date of the Commitment Letter) through September 30, 2024 (the date of the SPA termination), a period of approximately 116 days. Based on a commitment fee rate of 0.35% per annum on the $500,000,000 unfunded commitment, the accrued commitment fee for this period was approximately $556,164 (calculated as $500,000,000 × 0.35% ÷ 365 × 116). In addition, the ticking fee commenced on September 8, 2024 (90 days after the SPA signing date), and accrued at a rate of 0.175% per annum through the termination date — a period of 22 days, resulting in an additional accrual of approximately $52,740. Penterra's payment of these fees to the lenders constitutes compelling evidence that the Financing remained available and in good standing. Lenders do not charge commitment and ticking fees on commitments they have withdrawn or are unwilling to honor.
Furthermore, Penterra's voluntary termination of the commitment on October 1, 2024 — the day after the SPA was terminated — further confirms that the Financing commitment was extinguished at Penterra's election, not at the lenders' instigation. The notice to Ironclad Trust Company, N.A. (attention: Samantha Hwang) requesting termination of the commitment was a routine administrative step following the termination of the underlying acquisition agreement. It was not the result of a lender default, withdrawal, or refusal to fund.
Finally, the broader financial context confirms the absence of any Financing Failure. Penterra's cash on hand as of Q2 2024 was approximately $2.1 billion — more than sufficient to fund the entire $900,000,000 purchase price from internal resources, without any resort to debt financing whatsoever. The Term Loan Facility was utilized as part of Penterra's optimal capital structure strategy, not out of necessity. Penterra's ability to fund the acquisition from its own balance sheet is the ultimate refutation of any claim that the non-closing was attributable to financing unavailability.
C. The RTF Is a Financing-Specific Remedy, Not a General Termination Fee
The conclusion that the RTF is inapplicable is further reinforced by a textual and structural analysis of Section 8.2(b) within the broader framework of the SPA.
As discussed in Section III.C above, the RTF provision employs specific causation language. Trigger (i) requires that the Buyer's failure to close be "as a result of" and "due to the unavailability of the Financing." Trigger (ii) requires that the Buyer's failure to close be "solely because the Financing has not been funded." These phrases are not surplusage. They impose an affirmative causal requirement: the RTF is payable only when the cause of the non-closing is a financing deficiency. If the non-closing is caused by any other factor — including, as here, the failure of Buyer's closing conditions due to an MAE — the RTF is not triggered, regardless of whether the financing was or was not available.
The word "solely" in Trigger (ii) is particularly significant. Under Delaware law, "solely" means "to the exclusion of all else" or "only." See Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715, 738 (Del. Ch. 2008) (interpreting similar causation language in a financing-failure context). The inclusion of "solely" in Trigger (ii) ensures that the RTF is not triggered when the non-closing is attributable to a combination of financing unavailability and some other factor (e.g., condition failure), let alone when the non-closing is attributable entirely to a non-financing cause.
In the present case, Penterra's decision not to close was caused by the occurrence of a material adverse effect — specifically, the adverse Marlowe Asset Management-2 Phase II clinical data (23.4% Grade ≥3 CRS incidence, seven treatment-related deaths representing a 3.6% mortality rate, and a non-statistically significant overall response rate of 31.4% versus 28.9% in the control arm with p = 0.58) and the FDA's imposition of a partial clinical hold on VRD-4187 (IND 154832) on August 22, 2024. These events rendered the closing conditions in Sections 7.2(a) and 7.2(b) unsatisfied. There is no causal nexus between the non-closing and any financing deficiency. The Financing was available; Penterra did not close because the conditions to its obligation to close were not met.
The negotiating history of the RTF provision further confirms this interpretation, although resort to extrinsic evidence is unnecessary given the clarity of the contract language. As reflected in the negotiation drafts exchanged between Calderwood & Harkness and Zalcourt Archer & Cole between April and June 2024, the RTF was specifically proposed by Veridian's counsel as protection against the risk that Penterra's committed lenders would fail to fund the $500,000,000 term loan, leaving Veridian without a completed sale after months of exclusivity and the disruption of its business during the pendency of the Transaction. The RTF amount of $45,000,000 (5% of the purchase price) was calibrated to this specific risk. During negotiations, Penterra's negotiating team observed that Penterra's substantial cash on hand ($2.1 billion) and the $500 million/$400 million funding split meant that the risk of a true Financing Failure was remote. The RTF was ultimately agreed to at the 5% level (rather than the 6% initially proposed by Veridian) precisely because the parties recognized that Penterra had the independent resources to close even without the committed debt. The RTF was a backstop against the narrow risk that the lenders would not perform — not a general hedge against any outcome in which the deal did not close.
D. Veridian's Anticipated Counter-Arguments and Responses
Based on Veridian's demand letter dated October 15, 2024, and the positions articulated by Zalcourt Archer & Cole LLP in prior correspondence, we anticipate that Veridian may advance the following arguments in support of an RTF claim. We address each in turn.
1. Argument: Penterra's Termination Was Pretextual; the True Reason Was Unwillingness to Fund
Veridian may argue — and, indeed, has already suggested in its demand letter — that Penterra's assertion of an MAE is pretextual and that the true reason for Penterra's termination was "buyer's remorse." On this theory, Veridian would contend that because Penterra simply did not want to proceed with the Transaction (rather than being genuinely unable to close due to condition failure), the RTF should apply as though Penterra had refused to fund the purchase price.
Response. This argument fails for several independent reasons.
First, the RTF is triggered by the legal basis for termination under the SPA — not by a court's subjective assessment of the Buyer's motivation or state of mind. Penterra terminated under Section 8.1(d). That is a fact. Section 8.2(b) does not reference Section 8.1(d). That is also a fact. No amount of speculation about Penterra's motivations can transform a Section 8.1(d) termination into a Section 8.1(e) or Section 8.1(b) termination. The SPA's termination architecture is a closed system: each termination right has specific triggers, and the corresponding termination fee provisions are keyed to those specific triggers. If a party terminates under a particular provision, the consequences of that termination are governed by the SPA provisions that reference that particular termination trigger.
Second, Penterra's MAE position is well-supported on the merits. The adverse Marlowe Asset Management-2 Phase II clinical data and the FDA partial clinical hold are not trivial or marginal developments. A Grade ≥3 CRS rate of 23.4% (compared to 4.1% in the control arm), seven treatment-related deaths (3.6%), and a non-statistically significant efficacy signal represent a fundamental impairment of VRD-4187's clinical and commercial viability. We refer to our comprehensive MAE analysis memorandum dated August 25, 2024, the supplemental analysis dated September 2, 2024, and the independent clinical assessment prepared by Dr. Raymond Kapoor of Broadleaf Scientific Consulting LLC dated August 19, 2024, each of which provides detailed support for the MAE determination. There is nothing pretextual about Penterra's position.
Third, even if a court were ultimately to disagree with Penterra's MAE determination — a possibility that cannot be excluded given the inherently fact-intensive nature of MAE analysis under Delaware law — the remedy available to Veridian would be specific performance under SPA Section 10.12 (compelling Penterra to close) or, in the alternative, expectation damages, not the RTF. The RTF has its own separate and narrower trigger mechanism. A finding that no MAE occurred does not, by some alchemical process, convert a Section 8.1(d) termination into a Financing Failure. It would mean that Penterra's termination was invalid — not that the termination was caused by financing unavailability. In such a scenario, Veridian's remedy would be equitable or compensatory relief for wrongful termination, governed by Sections 8.3 and 10.12, not the RTF provision of Section 8.2(b).
2. Argument: The RTF Should Apply Because the Financing Conditions Were Not Satisfied
A more sophisticated argument that Veridian may advance is that the conditions precedent to the lenders' funding obligations under the Commitment Letter incorporated or mirrored the SPA's closing conditions, and that by asserting an MAE, Penterra effectively caused the financing conditions to fail — thereby creating a Financing Failure that triggers the RTF.
Response. This argument conflates two distinct concepts and should be rejected.
The RTF applies when the Buyer's failure to close is caused by the lenders' refusal or inability to fund their commitments. It does not apply when the Buyer, for reasons unrelated to the Financing, exercises a contractual right not to close — even if, hypothetically, the lenders' conditions to funding might also not have been satisfied as a consequence of the same underlying events.
To illustrate: it is true that the conditions precedent to funding under the Commitment Letter include a "SPA Rep Condition" requiring that the representations and warranties of the Sellers under the SPA be true and correct, and a "No MAE Condition" requiring that no MAE shall have occurred. These conditions in the Commitment Letter are parallel to (and, in fact, slightly less demanding than) the closing conditions in SPA Sections 7.2(a) and 7.2(b). It is therefore conceivable that, had Penterra attempted to draw on the facility, the lenders might have taken the position that their conditions to funding were not satisfied by reason of the same Marlowe Asset Management-2 data and FDA action.
But this hypothetical is irrelevant. The RTF is not triggered by a hypothetical financing failure; it is triggered by an actual Financing Failure — that is, by the Buyer's actual failure to close that is actually caused by the actual unavailability of the Financing. Here, no attempt to draw on the Financing was made. The lenders did not refuse to fund. The commitment was not withdrawn. Penterra terminated the SPA under Section 8.1(d) based on the MAE, and then separately terminated the Commitment Letter the following day. The chain of causation runs from the MAE to the termination; it does not run through any financing deficiency.
Moreover, the conditions to funding under the Commitment Letter are conditions for the benefit of the lenders — they exist to protect Summit Ridge and Ironclad from being required to fund a loan when the underlying acquisition target has experienced a material deterioration. They are not a mechanism to convert a buyer-side termination based on an MAE into a Financing Failure for purposes of triggering the RTF. To accept Veridian's argument would be to hold that any time a buyer terminates an SPA due to an MAE — where the committed financing also includes a parallel MAE condition — the buyer is subject to the RTF. Such a reading would effectively convert the RTF from a financing-specific remedy into a universal termination fee, which is contrary to the provision's plain language, its negotiated purpose, and the structural logic of the SPA.
3. Argument: The RTF Caps Buyer's Liability in Any Termination Scenario
Finally, Veridian may argue that Section 8.2(b) was intended to function as a cap on Penterra's total monetary exposure in any scenario where the Transaction does not close — essentially, that the RTF of $45,000,000 represents the maximum amount Penterra could ever owe as a consequence of the deal's failure.
Response. This argument is contrary to the SPA's express terms and would produce absurd results under established principles of Delaware contract interpretation.
Section 8.2(b) is clear that the RTF is the "sole and exclusive remedy" of the Sellers only "in the event of a termination described in this Section 8.2(b)" — i.e., only in the event of a Financing Failure. It is not described as the sole and exclusive remedy in all termination scenarios. The exclusive-remedy language is tied to the Financing Failure context, not to termination generally.
In the event of a non-Financing Failure termination — such as the present case — the parties' respective rights and remedies are governed by the general effect-of-termination provision (Section 8.3) and the specific performance provision (Section 10.12). Section 10.12 provides that either party may seek specific performance of the other party's obligations under the SPA, including the Buyer's obligation to consummate the closing if all conditions have been satisfied. Section 8.3 preserves liability for willful and material breach. These provisions exist as independent remedial frameworks that are available to the Sellers in appropriate circumstances.
To read the RTF as a cap on all buyer liability — regardless of the termination trigger — would render Section 10.12 (specific performance) and the willful-breach proviso in Section 8.3 superfluous. A court would never order specific performance to compel a closing (or award damages in lieu thereof) if the Buyer's maximum exposure were capped at $45,000,000 in all circumstances. Yet the parties plainly intended specific performance to be available, as evidenced by the inclusion of Section 10.12 and the extensive negotiation that surrounded that provision. Under the well-established Delaware canon that all provisions of a contract must be given effect and no provision should be rendered superfluous, see DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005); Kuhn Constr. Co. v. Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010), Veridian's reading must be rejected.
The proper interpretation is that the SPA establishes a tiered remedial framework: (a) in the event of a Financing Failure, the RTF is the Sellers' sole and exclusive remedy (capping the Buyer's exposure at $45,000,000); (b) in the event of a non-Financing Failure termination where the Buyer is not in breach, the SPA terminates with no further liability (Section 8.3); and (c) in the event of a non-Financing Failure termination where the Buyer has willfully and materially breached or where the Buyer has failed to close despite all conditions being satisfied for a reason other than financing unavailability, specific performance and/or expectation damages are available (Sections 8.3 and 10.12). This reading gives effect to all provisions of the SPA and reflects a coherent risk-allocation framework.
V. Implications for Anticipated Litigation
A. Veridian's Demand Letter (October 15, 2024)
As noted in Section II.C above, Veridian's demand letter dated October 15, 2024, sent by Zalcourt Archer & Cole LLP (Rebecca Whitmore), threatens litigation in the Court of Chancery of the State of Delaware, which has exclusive jurisdiction over disputes arising under the SPA pursuant to Section 10.6. Delaware law governs the SPA pursuant to Section 10.5.
The demand letter outlines Veridian's anticipated claims, which include: (i) a claim for specific performance under SPA Section 10.12 to compel Penterra to consummate the closing; (ii) alternatively, a claim for expectation damages, which Veridian characterizes as the difference between the $900,000,000 purchase price and the current fair market value of Veridian's equity (a figure Veridian has not specified but which, given the adverse clinical developments, is likely to be substantially lower than the purchase price); and (iii) a claim for the $45,000,000 RTF, asserted as an alternative or fallback position to the specific performance and damages claims.
Based on the demand letter's references to Veridian's litigation counsel's anticipated timeline, we expect a complaint to be filed in the Court of Chancery on or about November 15, 2024. The anticipated caption would be Veridian Biosciences, Inc. v. Penterra Pharmaceuticals Corp., C.A. No. 2024-_ (Del. Ch.).
It bears noting that the simultaneous assertion of a specific performance claim and an RTF claim creates a logical tension in Veridian's position. The RTF, by its terms, is the Sellers' "sole and exclusive remedy" in a Financing Failure scenario — meaning that if the RTF applies, Veridian cannot also seek specific performance or expectation damages. Conversely, if Veridian seeks specific performance (which it can only do if the RTF does not apply, i.e., if there was no Financing Failure), then the RTF claim is necessarily foreclosed. Veridian's decision to plead both claims in the alternative is understandable as a matter of litigation strategy, but the internal inconsistency of the two claims reinforces the conclusion that the RTF is a financing-specific remedy that does not apply in the circumstances of this case.
B. Penterra's Defensive Posture on the RTF
If Veridian includes an RTF claim in its anticipated complaint, Penterra's defense is straightforward and, in our view, compelling: the RTF provision's plain language limits its application to Financing Failure scenarios as defined in Section 8.2(b), and no Financing Failure occurred. The Financing remained available. Penterra terminated under Section 8.1(d), which is not an RTF-triggering provision. The RTF is not payable.
This defense is notably independent of the merits of the MAE dispute. That is, even if the Court of Chancery were ultimately to conclude that the Marlowe Asset Management-2 data and FDA partial clinical hold did not constitute a material adverse effect under the SPA's definition — a determination we believe would be erroneous but which we cannot exclude as a possibility — the RTF would still be inapplicable because the Financing was available throughout the relevant period. The MAE dispute affects whether Penterra's termination was valid; it does not affect whether the RTF is triggered. These are separate questions governed by separate contractual provisions.
Given the clarity of the contractual language, the RTF inapplicability issue is likely to be suitable for early dispositive motion practice in any Delaware Chancery proceeding. The question is one of pure contract interpretation and does not require extensive discovery. We would recommend raising the issue at the earliest procedural opportunity — potentially in a motion for partial summary judgment or a motion to dismiss the RTF count of Veridian's complaint — to eliminate the $45,000,000 RTF claim from the case early in the proceedings. This approach would narrow the litigation to the core MAE dispute and the associated specific performance/damages claims.
C. Relationship to Specific Performance and Damages Claims
The RTF analysis is distinct from, and does not resolve, Veridian's specific performance claim under SPA Section 10.12. The specific performance question turns on whether the closing conditions in Sections 7.2(a) and 7.2(b) were, in fact, satisfied (or would have been satisfied but for Penterra's invalid termination). If the court finds that an MAE did not occur and that all closing conditions were satisfied (or would have been satisfied absent Penterra's termination), Veridian's remedy would be specific performance — an order compelling Penterra to consummate the closing — or, if specific performance is impracticable or inequitable, damages in lieu thereof. The RTF would not be the remedy in this scenario because the non-closing was not caused by a Financing Failure.
Conversely, if the court finds that an MAE did occur and that Penterra validly terminated the SPA under Section 8.1(d), then neither specific performance nor the RTF would be available to Veridian. Penterra would have exercised a legitimate contractual right, and the SPA would have been validly terminated with no further liability other than the surviving provisions under Section 8.3.
The RTF would only be relevant in a narrow, hypothetical scenario that did not occur and cannot occur on these facts: a scenario in which (a) all closing conditions were satisfied, (b) the Buyer failed to close, and (c) the Buyer's failure to close was caused by the unavailability of the committed debt financing. Because none of these predicate conditions is met, the RTF is a dead letter in this dispute.
This analysis has an important strategic implication: by eliminating the RTF as a viable claim, Penterra can focus its litigation resources on the central MAE question, which is the battleground on which this case will be won or lost. If Penterra prevails on the MAE question, all of Veridian's claims fail. If Penterra does not prevail on the MAE question, Veridian's remedy is specific performance or damages under Sections 10.12 and 8.3 — a significant exposure, to be sure, but one that does not include the RTF.
VI. Penterra's Sunk Transaction Costs (Contextual Reference)
For completeness, and to provide context for the Board and management's understanding of Penterra's overall financial exposure in connection with the terminated Transaction, we set forth below a su

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