STOCK PURCHASE AGREEMENT
by and among
PENTERRA PHARMACEUTICALS CORP.,
a Delaware corporation,
as Buyer,
VERIDIAN BIOSCIENCES, INC.,
a Delaware corporation,
as the Company,
THE SELLERS IDENTIFIED ON THE SIGNATURE PAGES HERETO,
as the Sellers,
and
DAVID NG,
solely in his capacity as Stockholder Representative
Dated as of June 10, 2024
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of June 10, 2024, by and among:
(1) PENTERRA PHARMACEUTICALS CORP., a Delaware corporation, with its principal executive offices at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540 ("Buyer");
(2) VERIDIAN BIOSCIENCES, INC., a Delaware corporation, with its principal office at 550 Gateway Drive, Cambridge, Massachusetts 02142 (the "Company");
(3) THE STOCKHOLDERS of the Company listed on the signature pages hereto and on the Seller Schedule attached hereto as the Seller Schedule (collectively, the "Sellers" and each, individually, a "Seller"); and
(4) DAVID NG, acting solely in his capacity as the Stockholder Representative (the "Stockholder Representative").
Each of Buyer, the Company, each Seller, and the Stockholder Representative is referred to herein as a "Party" and, collectively, as the "Parties."
RECITALS
WHEREAS, the Sellers collectively own one hundred percent (100%) of the issued and outstanding capital stock of the Company, consisting of shares of common stock, par value $0.0001 per share ("Common Stock"), shares of Series A Preferred Stock, par value $0.0001 per share ("Series A Preferred Stock"), shares of Series B Preferred Stock, par value $0.0001 per share ("Series B Preferred Stock"), shares of Series C Preferred Stock, par value $0.0001 per share ("Series C Preferred Stock"), and shares of Series D Preferred Stock, par value $0.0001 per share ("Series D Preferred Stock" and, together with the Common Stock, Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, the "Shares");
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers desire to sell to Buyer, all of the Shares, on the terms and subject to the conditions set forth herein (the "Transactions");
WHEREAS, concurrently with the execution and delivery of this Agreement, certain key employees of the Company, including Dr. Julian Marek and Dr. Priya Chandrasekaran, are entering into Non-Competition and Non-Solicitation Agreements with Buyer, substantially in the form attached hereto as Exhibit B (the "Non-Competition Agreements"), the execution and delivery of which is a material inducement to Buyer to enter into this Agreement;
WHEREAS, the Board of Directors of Buyer has (i) determined that this Agreement and the Transactions are advisable, fair to, and in the best interests of Buyer and its stockholders, (ii) approved the execution, delivery, and performance of this Agreement by Buyer, and (iii) authorized the consummation of the Transactions on the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has (i) determined that this Agreement and the Transactions are advisable, fair to, and in the best interests of the Company and the Sellers, (ii) approved the execution, delivery, and performance of this Agreement by the Company, and (iii) recommended that the Sellers approve this Agreement and the Transactions;
WHEREAS, the Sellers holding the requisite vote under the Company's Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, the Investor Rights Agreement (as defined herein), and the Delaware General Corporation Law have approved this Agreement and the Transactions by written consent, as more fully described in the Stockholder Written Consent delivered concurrently herewith; and
WHEREAS, concurrently with the execution of this Agreement, the Parties are entering into an Escrow Agreement with Fidelis National Escrow Corp., substantially in the form attached hereto as Exhibit A (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms.
As used in this Agreement, the following terms shall have the meanings ascribed to them below:
"Acquisition Proposal" means any inquiry, proposal, or offer from any Person (other than Buyer or its Affiliates) relating to, in a single transaction or a series of related transactions, (a) any acquisition of twenty percent (20%) or more of the outstanding equity interests (including securities convertible into or exercisable for such equity interests) of the Company, (b) any acquisition of twenty percent (20%) or more of the consolidated total assets of the Company (measured by either book value or fair market value), (c) any merger, consolidation, recapitalization, liquidation, dissolution, or similar business combination involving the Company, or (d) any other transaction, the consummation of which would reasonably be expected to prevent or materially delay the consummation of the Transactions contemplated by this Agreement.
"Action" means any action, suit, arbitration, proceeding, claim, complaint, charge, hearing, investigation, inquiry, or audit by or before any Governmental Authority or arbitration tribunal.
"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, as such terms are used in and construed under Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
"Agreement" has the meaning set forth in the Preamble.
"Bankruptcy and Equity Exceptions" means (a) the effect of any applicable Law relating to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or preferential transfer, or similar Laws relating to or affecting creditors' rights generally and (b) the effect of general principles of equity, including concepts of materiality, reasonableness, good faith, and fair dealing, regardless of whether considered in a proceeding in equity or at law.
"Basket Amount" has the meaning set forth in Section 9.4(a).
"Business Day" means any day other than a Saturday, a Sunday, or any day on which banks located in the City of New York, New York are required or authorized by Law to close.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Closing Certificate" has the meaning set forth in Section 7.3(c).
"Buyer Indemnified Parties" has the meaning set forth in Section 9.2.
"Cap" has the meaning set forth in Section 9.4(b).
"Claim Notice" has the meaning set forth in Section 9.5(a).
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the Recitals.
"Company" has the meaning set forth in the Preamble.
"Confidentiality Agreement" means that certain Confidentiality and Non-Disclosure Agreement, dated as of March 4, 2024, by and between Buyer and the Company.
"Contract" means any legally binding written or oral agreement, contract, subcontract, lease, sublease, license, sublicense, understanding, instrument, note, bond, mortgage, indenture, warranty, insurance policy, benefit plan, purchase order, or other arrangement.
"Disclosure Schedules" means the disclosure schedules delivered by the Sellers and the Company to Buyer concurrently with the execution and delivery of this Agreement.
"Disproportionate Impact Exception" has the meaning set forth in the definition of "Material Adverse Effect."
"Encumbrance" means any lien, pledge, hypothecation, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest, or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset, and any restriction on the possession, exercise, or transfer of any other attribute of ownership of any asset).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Agent" means Fidelis National Escrow Corp.
"Escrow Agreement" means that certain Escrow Agreement, dated as of the date hereof, by and among Buyer, the Stockholder Representative, and the Escrow Agent, substantially in the form attached hereto as Exhibit A.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
"Expense Fund Account" has the meaning set forth in Section 6.5.
"FCPA" means the United States Foreign Corrupt Practices Act of 1977, as amended.
"FDA" means the United States Food and Drug Administration.
"Financing Commitment" has the meaning set forth in Section 4.4.
"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as amended.
"FTC" means the United States Federal Trade Commission.
"Fundamental Representations" means the representations and warranties set forth in Section 3.1 (Organization and Qualification), Section 3.2 (Capitalization), Section 3.3 (Authorization; Enforceability), Section 3.24 (Brokers' Fees), Section 4.1 (Organization), Section 4.2 (Authorization; Enforceability), and Section 4.7 (Brokers' Fees).
"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied consistently throughout the periods involved.
"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign government or political subdivision thereof, or any agency, authority, bureau, commission, department, official, or instrumentality of such government or political subdivision thereof, or any self-regulatory organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations, or orders of such organization or authority have the force of Law), or any arbitrator, court, or tribunal of competent jurisdiction, including the United States Securities and Exchange Commission, the FDA, the FTC, the United States Department of Justice, the Internal Revenue Service, and the European Medicines Agency.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"IND" means an Investigational New Drug Application, as defined under 21 C.F.R. Part 312 and any equivalent application in any other jurisdiction.
"Indemnification Basket" has the meaning set forth in Section 9.4(a).
"Indemnification Cap" has the meaning set forth in Section 9.4(b).
"Indemnification Escrow Account" means the escrow account established pursuant to the Escrow Agreement for the deposit of the Indemnification Escrow Amount.
"Indemnification Escrow Amount" means One Hundred Eighty Million Dollars ($180,000,000), to be deposited into the Indemnification Escrow Account at Closing.
"Indemnified Party" has the meaning set forth in Section 9.5(a).
"Indemnifying Party" has the meaning set forth in Section 9.5(a).
"intellectual Property" means all intellectual property and industrial property rights of every kind and description throughout the world, including all (a) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof ("Patents"), (b) trademarks, service marks, trade names, trade dress, logos, corporate names, Internet domain names, and all goodwill associated therewith ("Trademarks"), (c) copyrights and copyrightable works (including software and databases), (d) trade secrets, know-how, inventions (whether patentable or not), discoveries, improvements, technology, business and technical information, databases, data collections, and other confidential and proprietary information and all rights therein ("Trade Secrets"), (e) rights of publicity, (f) moral rights and rights of attribution, and (g) all registrations, applications for registration, and renewals for any of the foregoing.
"IRS" means the United States Internal Revenue Service.
"Knowledge" means (i) with respect to the Sellers and the Company, the actual knowledge, after reasonable inquiry of their respective direct reports, of Dr. Julian Marek, Dr. Priya Chandrasekaran, Steven R. Kessler, Dr. Anne-Marie Fontaine, and Rachel Stein-Goldberg; and (ii) with respect to Buyer, the actual knowledge, after reasonable inquiry of their respective direct reports, of Dr. Anand Rajagopal, Catherine M. Burgess, Thomas F. Holbrook, and Natalie Reiner.
"Law" means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree, or order of any Governmental Authority.
"Lien" means any Encumbrance.
"Losses" means any and all losses, damages, liabilities, deficiencies, claims, Actions, judgments, settlements, penalties, fines, costs, and expenses (including reasonable and documented attorneys' fees and expenses, experts' fees, and court costs), whether or not involving a third-party claim.
"Material Adverse Effect" means any event, change, development, circumstance, occurrence, condition, state of facts, or effect that, individually or in the aggregate, (a) has had or would reasonably be expected to have a material adverse effect on the business, assets, liabilities, results of operations, or financial condition of the Company, taken as a whole, or (b) would prevent or materially delay the ability of the Company or the Sellers to consummate the Transactions contemplated hereby; provided, however, that none of the following, either alone or in combination, 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, financial, or political conditions (including changes in interest rates, exchange rates, stock, bond, or debt prices and market fluctuations) in the United States or any other country or region in which the Company conducts business; (ii) conditions generally affecting the biotechnology, biopharmaceutical, or pharmaceutical industries and not specifically relating to the Company; (iii) any changes in applicable Law or GAAP (or authoritative interpretation thereof) after the date of this Agreement; (iv) any pandemic, epidemic, or disease outbreak (including COVID-19, any mutation or variation thereof, and any similar public health emergency), and any Law, directive, guideline, or recommendation issued by a Governmental Authority in connection therewith; (v) natural disasters, weather conditions, acts of God, acts of war (whether or not declared), armed hostilities, sabotage, terrorism (including cyberterrorism or cyberattacks), military actions, or any escalation or worsening thereof; (vi) changes in financial, credit, capital, or securities markets generally (including any disruption thereof and any decline in the price of any security or any market index); and (vii) the announcement or pendency of this Agreement or the Transactions contemplated hereby, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, licensors, licensees, distributors, collaboration partners, clinical trial investigators or sites, employees, or Governmental Authorities; provided, further, that with respect to clauses (i) through (vi), such changes, events, developments, circumstances, occurrences, conditions, states of facts, or effects shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such changes, events, developments, circumstances, occurrences, conditions, states of facts, or effects have a disproportionate adverse impact on the Company relative to other companies operating in the biotechnology industry of comparable size and stage of development (the "Disproportionate Impact Exception").
"Net Closing Payment" means an amount equal to the Purchase Price minus the Indemnification Escrow Amount minus the Stockholder Representative Expense Fund Amount, which is Seven Hundred Seventeen Million Five Hundred Thousand Dollars ($717,500,000).
"Non-Competition Agreements" has the meaning set forth in the Recitals.
"Order" means any order, judgment, injunction, decree, writ, stipulation, determination, or award entered by or with any Governmental Authority.
"Outside Date" means December 10, 2024.
"Party" or "Parties" has the meaning set forth in the Preamble.
"Permitted Liens" means (a) statutory Liens for current Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) mechanics', carriers', workers', repairers', materialmen's, warehousemen's, and other similar Liens arising or incurred in the ordinary course of business consistent with past practice for amounts not yet due and payable, (c) Liens arising under applicable workers' compensation, unemployment insurance, and other social legislation, (d) Liens on leased property reserved in leases in favor of the lessor, (e) purchase money Liens and Liens securing rental payments under capital lease arrangements, (f) Liens imposed by applicable securities Laws, (g) easements, covenants, conditions, restrictions, and other similar matters of record affecting title to real property that do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with the Company's business, and (h) zoning, entitlement, building, and other land use regulations imposed by any Governmental Authority having jurisdiction over such real property that are not violated by the current use and operation of such real property.
"Person" means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Authority.
"Pre-Closing Tax Period" means any taxable period ending on or before the Closing Date and the portion of any Straddle Period through the end of the Closing Date.
"Purchase Price" means Nine Hundred Million Dollars ($900,000,000).
"R&W Policy" has the meaning set forth in Section 6.6.
"Reverse Termination Fee" means Forty-Five Million Dollars ($45,000,000), equal to five percent (5%) of the Purchase Price.
"SEC" means the United States Securities and Exchange Commission.
"Seller Closing Certificate" has the meaning set forth in Section 7.2(d).
"Seller Indemnified Parties" has the meaning set forth in Section 9.3.
"Seller Schedule" means the schedule listing each Seller, the number and class of Shares owned by such Seller, such Seller's percentage ownership of the Shares (on a fully diluted basis), and such Seller's pro rata allocation of the Purchase Price, attached hereto as the Seller Schedule.
"Sellers" has the meaning set forth in the Preamble.
"Shares" has the meaning set forth in the Recitals.
"Stockholder Representative" has the meaning set forth in the Preamble.
"Stockholder Representative Expense Fund" or "Stockholder Representative Expense Fund Amount" means Two Million Five Hundred Thousand Dollars ($2,500,000), to be deposited into a separate Expense Fund Account at Closing for the Stockholder Representative's use in accordance with Section 6.5.
"Straddle Period" means any taxable period beginning on or before and ending after the Closing Date.
"Superior Proposal" means an unsolicited bona fide written Acquisition Proposal (with the references to "twenty percent (20%)" in the definition of "Acquisition Proposal" being replaced with "a majority") made by a third party that the Board of Directors of the Company determines in good faith, after consultation with its financial advisor and outside legal counsel, to be (a) more favorable to the Sellers from a financial point of view than the Transactions contemplated by this Agreement (taking into account any modifications proposed by Buyer pursuant to Section 5.4(d)), (b) reasonably capable of being consummated on the terms proposed, and (c) not subject to any financing contingency, or, if subject to a financing contingency, with respect to which committed financing has been obtained on terms reasonably satisfactory to the Board of Directors of the Company.
"Target Termination Fee" means Thirty-Six Million Dollars ($36,000,000), equal to four percent (4%) of the Purchase Price.
"Tax" or "Taxes" means (a) all federal, state, local, and foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property (whether tangible or intangible), sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, and other taxes, fees, assessments, or charges of any kind whatsoever, imposed by any Governmental Authority, together with all interest, penalties, and additions to tax imposed with respect thereto, and (b) any liability for the payment of any amounts of the type described in clause (a) as a result of transferee or successor liability, of being a member of an affiliated, consolidated, combined, or unitary group for any period, or as a result of any Tax sharing, Tax indemnity, Tax allocation, or similar Contract.
"Tax Representations" means the representations and warranties set forth in Section 3.16.
"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and any amendment thereof.
"Transactions" has the meaning set forth in the Recitals.
"Transfer Taxes" has the meaning set forth in Section 6.8.
"VeriTCE Platform" means the Company's proprietary T-cell engager technology platform, as more fully described in the Company's regulatory filings and internal research documentation, including all associated Trade Secrets, know-how, processes, techniques, and improvements thereto.
"VRD-4187" means the Company's lead drug candidate, a bispecific T-cell engager targeting delta-like ligand 3 ("DLL3")-expressing tumors, principally for the treatment of small cell lung cancer ("SCLC"), utilizing the VeriTCE Platform, as further described on Schedule 3.19.
Section 1.2 — Rules of Construction.
Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Schedule," "Exhibit," and "Annex" refer to the specified Article, Section, Schedule, Exhibit, or Annex of or to this Agreement unless otherwise specified; (e) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified; (f) the word "or" shall not be exclusive; (g) references to "days" shall mean calendar days unless the term "Business Days" is used; (h) references to any Person include the successors and permitted assigns of that Person; (i) references to any agreement or Contract are to that agreement or Contract as amended, restated, supplemented, or modified from time to time in accordance with the terms thereof; (j) references to any Law mean such Law as amended, modified, codified, replaced, or reenacted, in whole or in part, and in effect from time to time, including rules, regulations, enforcement procedures, and any interpretations promulgated thereunder; (k) all monetary amounts set forth herein are denominated in lawful currency of the United States of America; (l) references to "$" or "Dollars" mean the lawful currency of the United States of America; (m) the headings and captions in this Agreement are for convenience of reference only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement; (n) the Disclosure Schedules and the Exhibits attached hereto are incorporated herein and shall be considered a part of this Agreement for all purposes; and (o) the Parties have participated jointly in the negotiation and drafting of this Agreement, and in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II — PURCHASE AND SALE; CLOSING
Section 2.1 — Purchase and Sale of Shares.
Subject to the terms and conditions set forth in this Agreement, at the Closing, each Seller shall sell, transfer, assign, convey, and deliver to Buyer, and Buyer shall purchase and accept from each Seller, all of the Shares owned by such Seller, free and clear of all Liens (other than restrictions under applicable securities Laws and Liens arising under this Agreement). The aggregate purchase price for all of the Shares shall be Nine Hundred Million Dollars ($900,000,000) in cash (the "Purchase Price"), payable in immediately available funds at the Closing in accordance with Section 2.3. At and following the Closing, Buyer shall be the sole record and beneficial owner of one hundred percent (100%) of the issued and outstanding capital stock of the Company and shall be entitled to exercise all rights of ownership with respect thereto.
Section 2.2 — Allocation of Purchase Price Among Sellers.
The Purchase Price shall be allocated among the Sellers in accordance with the allocation schedule set forth on Schedule 2.2, which allocation shall be based upon each Seller's percentage ownership of the Shares (determined on a fully diluted basis after giving effect to the conversion, exercise, or exchange of all outstanding options, warrants, convertible notes, and other convertible securities of the Company). Each Seller's pro rata share of the Purchase Price shall be reduced by such Seller's pro rata share of (a) the Indemnification Escrow Amount and (b) the Stockholder Representative Expense Fund Amount. The allocation set forth on Schedule 2.2 has been prepared by the Company and reviewed and approved by the Stockholder Representative, and the Sellers and Buyer agree to report the Transactions in a manner consistent with such allocation for all Tax purposes and shall not take any position inconsistent therewith on any Tax Return or in any audit or Tax proceeding, unless required to do so by applicable Law.
Section 2.3 — Payment at Closing.
(a) At the Closing, Buyer shall pay or cause to be paid the following amounts by wire transfer of immediately available funds:
(i) Indemnification Escrow Amount. The Indemnification Escrow Amount of One Hundred Eighty Million Dollars ($180,000,000) shall be paid by wire transfer to Fidelis National Escrow Corp., as Escrow Agent, for deposit into the Indemnification Escrow Account established and maintained pursuant to the Escrow Agreement, in accordance with the wire transfer instructions provided by the Escrow Agent to Buyer no later than two (2) Business Days prior to the Closing Date.
(ii) Stockholder Representative Expense Fund. The Stockholder Representative Expense Fund Amount of Two Million Five Hundred Thousand Dollars ($2,500,000) shall be paid by wire transfer to Fidelis National Escrow Corp., as Escrow Agent, for deposit into a separate Expense Fund Account established and maintained pursuant to the Escrow Agreement, in accordance with the wire transfer instructions provided by the Escrow Agent to Buyer no later than two (2) Business Days prior to the Closing Date.
(iii) Net Closing Payment. The Net Closing Payment of Seven Hundred Seventeen Million Five Hundred Thousand Dollars ($717,500,000) (being the Purchase Price of $900,000,000, minus the Indemnification Escrow Amount of $180,000,000, minus the Stockholder Representative Expense Fund Amount of $2,500,000) shall be paid by wire transfer to the Sellers (or to a paying agent designated by the Stockholder Representative in writing to Buyer no later than three (3) Business Days prior to the Closing Date) in accordance with the allocation set forth on Schedule 2.2 and the wire transfer instructions provided by the Stockholder Representative (or such paying agent) to Buyer no later than two (2) Business Days prior to the Closing Date.
(b) In the event that the Stockholder Representative designates a paying agent for the distribution of the Net Closing Payment to the Sellers, such designation shall be in writing and shall include the paying agent's name, address, wire transfer instructions, and evidence of such paying agent's authorization to receive funds on behalf of the Sellers. Buyer shall be entitled to rely conclusively on such designation and the corresponding wire transfer instructions and shall have no liability to any Seller for any amounts properly paid to such paying agent in accordance with such designation.
Section 2.4 — Closing.
The closing of the Transactions (the "Closing") shall take place remotely via electronic exchange of executed signature pages and other closing deliverables at 10:00 a.m. Eastern Time on the third (3rd) Business Day following the satisfaction or waiver of all of the conditions to Closing set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), or on such other date as Buyer and the Stockholder Representative shall mutually agree in writing. The date on which the Closing actually occurs is referred to herein as the "Closing Date." For the avoidance of doubt, the Closing shall be deemed to occur and be effective as of 11:59 p.m. Eastern Time on the Closing Date.
Section 2.5 — Closing Deliverables.
(a) Seller Deliverables at Closing. At or prior to the Closing, the Sellers shall deliver or cause to be delivered to Buyer the following:
(i) stock certificates representing all of the Shares, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank by the applicable Seller, with all necessary stock transfer tax stamps affixed thereto, or, in the case of Shares held in book-entry form, evidence reasonably satisfactory to Buyer that such Shares have been transferred to Buyer;
(ii) the Seller Closing Certificate, duly executed by an authorized officer of the Company, substantially in the form attached hereto as Exhibit E, certifying as to the satisfaction of the conditions set forth in Sections 7.2(a), 7.2(b), and 7.2(c);
(iii) a certificate of the Secretary or an Assistant Secretary of the Company, dated as of the Closing Date, certifying as to (A) the incumbency and specimen signature of each officer of the Company executing this Agreement or any other document delivered in connection with the Closing, (B) true, correct, and complete copies of the Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, each as in effect as of the Closing, and (C) true, correct, and complete copies of all resolutions of the Board of Directors of the Company authorizing the execution, delivery, and performance of this Agreement and the consummation of the Transactions;
(iv) a certificate of good standing (or its equivalent) of the Company issued by the Secretary of State of the State of Delaware and dated not more than five (5) Business Days prior to the Closing Date;
(v) a certificate of good standing (or its equivalent) of the Company issued by the Secretary of the Commonwealth of Massachusetts and dated not more than five (5) Business Days prior to the Closing Date;
(vi) the Escrow Agreement, duly executed by the Stockholder Representative and the Escrow Agent;
(vii) the Non-Competition and Non-Solicitation Agreements, duly executed by Dr. Julian Marek and Dr. Priya Chandrasekaran;
(viii) a properly completed and duly executed certificate (a "FIRPTA Certificate") from the Company, substantially in the form attached hereto as Exhibit D, certifying that the Company is not and has not been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, together with an executed notice to the IRS in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2);
(ix) a properly completed and duly executed certificate from each Seller that is not a "foreign person" for purposes of Section 1445 of the Code, in the form prescribed by Treasury Regulations Section 1.1445-2(b)(2), or, in the case of a Seller that is a "disregarded entity" for U.S. federal income tax purposes, a certificate from the owner of such disregarded entity, complying with Treasury Regulations Section 1.1445-2(b)(2)(iii);
(x) written resignations, effective as of the Closing, of each director and officer of the Company as Buyer may reasonably request in writing at least five (5) Business Days prior to the Closing Date;
(xi) payoff letters, in form and substance reasonably satisfactory to Buyer, from each holder of Company indebtedness, if any, together with evidence that all Liens securing such indebtedness will be released at or promptly following the Closing;
(xii) evidence reasonably satisfactory to Buyer that the requisite Seller approval has been obtained by the delivery of the executed Stockholder Written Consent and Joinder Agreement, substantially in the form attached hereto as Exhibit C; and
(xiii) such other documents, instruments, certificates, and agreements as Buyer may reasonably request and that are customary for transactions of the nature contemplated by this Agreement.
(b) Buyer Deliverables at Closing. At or prior to the Closing, Buyer shall deliver or cause to be delivered to the Stockholder Representative (or, as applicable, the Escrow Agent or the Sellers) the following:
(i) the Purchase Price, paid in accordance with Section 2.3;
(ii) the Buyer Closing Certificate, duly executed by an authorized officer of Buyer, substantially in the form attached hereto as Exhibit F, certifying as to the satisfaction of the conditions set forth in Sections 7.3(a) and 7.3(b);
(iii) the Escrow Agreement, duly executed by Buyer; and
(iv) such other documents, instruments, certificates, and agreements as the Stockholder Representative may reasonably request and that are customary for transactions of the nature contemplated by this Agreement.
Section 2.6 — Withholding.
Buyer shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts as are required to be deducted and withheld under the Code, or any provision of applicable state, local, or foreign Tax Law, with respect to the making of such payment. Buyer shall use commercially reasonable efforts to provide the Stockholder Representative with advance written notice of any anticipated withholding (other than withholding required as a result of a Seller's failure to deliver a FIRPTA Certificate or a non-foreign person certificate required by Section 2.5(a)(viii) or Section 2.5(a)(ix)), and shall cooperate with the Stockholder Representative to minimize or eliminate any such withholding to the extent permissible under applicable Law. To the extent that amounts are so deducted and withheld by Buyer and timely remitted to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
Except as set forth in the Disclosure Schedules (subject to Section 10.14), the Sellers and the Company, jointly and severally, represent and warrant to Buyer as of the date of this Agreement and as of the Closing Date (except, in each case, for representations and warranties that by their terms address matters only as of another specified date, which shall be so made only as of such specified date) as follows:
Section 3.1 — Organization and Qualification.
The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Company's registered agent in the State of Delaware is Tidewater Registered Agents LLC, located at 838 Walker Road, Suite 21-2, Dover, Delaware 19904. The Company has full corporate power and authority to own, operate, and lease its properties and assets as currently owned, operated, and leased, and to carry on its business as currently conducted. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification or licensing, including the Commonwealth of Massachusetts, the State of California, and the State of Maryland, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has made available to Buyer true, correct, and complete copies of the Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, each as in effect on the date hereof. The Company does not have any subsidiaries and does not own, directly or indirectly, any equity interest in any other Person.
Section 3.2 — Capitalization.
(a) The authorized capital stock of the Company consists of the shares of Common Stock and the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, as set forth in complete detail on Schedule 3.2. All of the issued and outstanding Shares have been duly authorized, validly issued, are fully paid and non-assessable, and were issued in compliance with all applicable securities Laws and the Company's Amended and Restated Certificate of Incorporation. Schedule 3.2 sets forth a true, correct, and complete list of (i) each class and series of capital stock of the Company, (ii) the number of authorized shares of each class and series, (iii) the number of issued and outstanding shares of each class and series, and (iv) the record holders thereof.
(b) The Seller Schedule sets forth a true, correct, and complete list of each Seller, together with (i) the number, class, and series of Shares owned, beneficially and of record, by such Seller, (ii) such Seller's percentage ownership of the Shares on a fully diluted basis, and (iii) such Seller's pro rata allocation of the Purchase Price. The Sellers collectively own one hundred percent (100%) of the issued and outstanding Shares, which ownership interests are as follows: Crestline Ventures, LP (28.3%), Boreal Health Partners Fund III, LP (19.7%), Apex Growth Equity Fund II, LP (14.1%), Dr. Julian Marek (8.4%), Dr. Priya Chandrasekaran (6.2%), participants in the Company's equity incentive plan and ESOP pool (9.8%), and other institutional investors (approximately 13.5%).
(c) Except as set forth on Schedule 3.2, there are no outstanding (i) shares of capital stock or other equity interests in the Company, (ii) securities convertible into or exchangeable for shares of capital stock or other equity interests in the Company, (iii) options, warrants, rights (including conversion or preemptive rights, subscription rights, rights of first refusal, or similar rights), stock appreciation rights, phantom stock rights, or other agreements, arrangements, or commitments of any character obligating the Company to issue, sell, or transfer any shares of its capital stock or other equity interests or any securities convertible into or exchangeable for such shares or equity interests, or (iv) agreements or commitments of any character relating to the voting, transfer, or registration of any shares of capital stock or other equity interests of the Company. For the avoidance of doubt, the ESOP pool, constituting 9.8% of the fully diluted equity of the Company, is set forth on Schedule 3.2, and all outstanding options under the Company's equity incentive plan shall either be exercised or cancelled in connection with the Closing, with the holders thereof receiving their applicable portion of the Purchase Price in accordance with Schedule 2.2.
(d) Except for the Amended and Restated Investor Rights Agreement, dated as of August 15, 2021, by and among the Company and the investors signatory thereto (the "Investor Rights Agreement"), as set forth on Schedule 3.2, no Person has any right to require the Company to register any securities of the Company under the Securities Act of 1933, as amended, or any similar state statute. The Investor Rights Agreement shall be terminated effective as of the Closing pursuant to its terms.
Section 3.3 — Authorization; Enforceability.
The Company has all requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement and each of the ancillary agreements to which the Company is a party and to consummate the Transactions contemplated hereby and thereby. The execution, delivery, and performance of this Agreement and each ancillary agreement by the Company, and the consummation of the Transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company, including approval by the Board of Directors of the Company and the requisite approval of the Sellers (which has been obtained by written consent representing in excess of ninety percent (90%) of the outstanding Shares, as delivered on June 14, 2024). Each Seller has full legal right, power, and authority to execute, deliver, and perform its, his, or her obligations under this Agreement and to sell, transfer, and deliver the Shares owned by such Seller. This Agreement has been duly executed and delivered by the Company and each Seller and constitutes, and each ancillary agreement, when duly executed and delivered by the Company, the Sellers, or the Stockholder Representative, will constitute, the legal, valid, and binding obligation of the Company and each Seller (or the Stockholder Representative, as applicable), enforceable against such Person in accordance with its terms, subject in each case to the Bankruptcy and Equity Exceptions.
Section 3.4 — No Conflicts; Consents.
(a) The execution, delivery, and performance of this Agreement by the Company and each Seller, and the consummation of the Transactions contemplated hereby, do not and will not (with or without notice, lapse of time, or both): (i) conflict with, result in a breach or violation of, or constitute a default under the Company's Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws; (ii) conflict with, result in a breach or violation of, or constitute a default under, or result in the acceleration of, or create in any party the right to accelerate, terminate, modify, or cancel any material Contract to which the Company is a party or by which the Company or any of its properties or assets is bound (except as set forth on Schedule 3.4); (iii) result in the creation or imposition of any Lien upon any properties or assets of the Company (other than Permitted Liens); or (iv) violate any Law or Order applicable to the Company or any of its properties or assets.
(b) Except as set forth on Schedule 3.4, no consent, approval, order, or authorization of, or registration, declaration, or filing with, any Governmental Authority is required to be obtained or made by or with respect to the Company or any Seller in connection with the execution, delivery, and performance of this Agreement or the consummation of the Transactions, other than (i) compliance with the applicable requirements of the HSR Act (which has been satisfied — the parties submitted the pre-merger notification and report forms on April 22, 2024, and early termination of the applicable waiting period was granted on May 20, 2024), and (ii) such consents, approvals, orders, authorizations, registrations, declarations, and filings as may be required under applicable state securities or "blue sky" laws.
Section 3.5 — Financial Statements.
(a) The Company has delivered to Buyer true, correct, and complete copies of: (i) the audited consolidated financial statements of the Company (including the balance sheets, statements of operations, statements of cash flows, statements of stockholders' equity (deficit), and the notes thereto) for each of the fiscal years ended December 31, 2021, December 31, 2022, and December 31, 2023 (the "Annual Financial Statements"), which have been audited by Northbridge Accounting Group LLP (engagement partner: Patrick Calloway, CPA); and (ii) the unaudited consolidated financial statements of the Company (including the balance sheet and statement of operations) for the three-month period ended March 31, 2024 (the "Interim Financial Statements" and, together with the Annual Financial Statements, the "Financial Statements").
(b) The Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods indicated (except, in the case of the Interim Financial Statements, for the absence of notes thereto and normal year-end adjustments that are not, individually or in the aggregate, material). The Financial Statements present fairly, in all material respects, the financial condition, results of operations, stockholders' equity (deficit), and cash flows of the Company as of the dates and for the periods indicated. For the fiscal year ended December 31, 2023, the Company reported revenue of zero dollars ($0) (reflecting its status as a clinical-stage company with no product revenue), a net loss of approximately Eighty-Seven Million Three Hundred Thousand Dollars ($87,300,000), and, as reflected in the Interim Financial Statements, cash and cash equivalents of approximately One Hundred Twelve Million Four Hundred Thousand Dollars ($112,400,000) as of March 31, 2024.
(c) The Company does not have any liability, indebtedness, obligation, expense, claim, deficiency, guaranty, or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured, or otherwise, that would be required to be reflected on a balance sheet prepared in accordance with GAAP, except for: (i) liabilities set forth in the Financial Statements or the notes thereto; (ii) liabilities that have arisen since March 31, 2024 in the ordinary course of business consistent with past practice (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law); and (iii) liabilities that would not, individually or in the aggregate, be material.
Section 3.6 — Absence of Certain Changes.
Since December 31, 2023, through the date of this Agreement: (a) the Company has conducted its business in the ordinary course of business consistent with past practice in all material respects; and (b) no Material Adverse Effect has occurred. Without limiting the generality of the foregoing, except as set forth on Schedule 3.6, since December 31, 2023, the Company has not taken any of the actions that would, if taken after the date hereof without the prior written consent of Buyer, constitute a breach of Section 5.1(a).
Section 3.7 — Compliance with Laws.
The Company is, and since January 1, 2021 has been, in compliance in all material respects with all applicable Laws, including all applicable regulations promulgated by the FDA, including 21 C.F.R. Parts 11, 50, 54, 56, 58, 210, 211, 312, and 314 (to the extent applicable), and all applicable foreign equivalents thereof. Except as set forth on Schedule 3.7, since January 1, 2021, the Company has not received any written or, to the Knowledge of the Sellers, oral notice of any violation of, or noncompliance with, any applicable Law from any Governmental Authority that has not been fully resolved. The Company is not a party to, subject to, or bound by, any Order of any Governmental Authority.
Section 3.8 — Permits and Licenses.
The Company holds and maintains all permits, licenses, authorizations, consents, approvals, franchises, variances, exemptions, orders, registrations, and certifications of all Governmental Authorities (collectively, "Permits") that are necessary for the Company to own or lease its properties and assets and to conduct its business as currently conducted, including IND No. 154832 for VRD-4187, as set forth on Schedule 3.8. All such Permits are valid and in full force and effect, and no suspension, cancellation, modification, revocation, or nonrenewal of any such Permit is pending or, to the Knowledge of the Sellers, threatened. The Company is in compliance in all material respects with the terms of all such Permits.
Section 3.9 — Litigation.
Except as set forth on Schedule 3.9, there is no Action pending or, to the Knowledge of the Sellers, threatened against the Company, any of its directors or officers (in their capacities as such), or any of the Company's properties or assets, that (a) would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, or (b) challenges or seeks to prevent, enjoin, alter, or materially delay the Transactions contemplated by this Agreement. To the Knowledge of the Sellers, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any such Action. The Company is not a party to or subject to any Order of any Governmental Authority, except for Orders of general applicability.
Section 3.10 — Intellectual Property.
(a) Schedule 3.10 sets forth a true, correct, and complete list of all registered intellectual Property owned by the Company (or for which applications have been filed by or on behalf of the Company), including (i) all Patents comprising or relating to the VeriTCE Platform, (ii) all composition-of-matter and method-of-use Patents relating to VRD-4187, (iii) all registered Trademarks, (iv) all registered copyrights, and (v) all domain name registrations (collectively, the "Registered IP"), in each case specifying, as applicable, the registration or application number, the jurisdiction of issuance or filing, the date of issuance or filing, the record owner, and, for Patents, the expected expiration date.
(b) The Company is the sole and exclusive owner of all right, title, and interest in and to the Registered IP and all other intellectual Property used in or necessary for the conduct of the Company's business as currently conducted, free and clear of all Liens (other than Permitted Liens), or has valid and enforceable licenses or rights to use such intellectual Property as needed for the conduct of its business. All Registered IP that has been issued or registered is valid, subsisting, and enforceable, and, to the Knowledge of the Sellers, is not subject to any outstanding Order, stipulation, or agreement adversely affecting the Company's use thereof or rights thereto.
(c) To the Knowledge of the Sellers, the conduct of the Company's business as currently conducted does not infringe upon, misappropriate, dilute, or otherwise violate the intellectual Property of any third party, and no Action is pending or, to the Knowledge of the Sellers, threatened, alleging any such infringement, misappropriation, dilution, or violation. To the Knowledge of the Sellers, no third party is infringing upon, misappropriating, diluting, or otherwise violating any intellectual Property owned by the Company.
(d) Each Person who is or was an employee, consultant, contractor, or officer of the Company and who has contributed to the creation or development of any intellectual Property on behalf of the Company has executed a valid and enforceable invention assignment agreement or agreement containing provisions assigning to the Company all right, title, and interest in and to all intellectual Property created by such Person within the scope of such Person's employment or engagement. Without limiting the foregoing, valid and enforceable invention assignment agreements have been executed by Dr. Julian Marek and Dr. Priya Chandrasekaran, as founders of the Company, which agreements are in full force and effect and have not been amended, supplemented, or modified.
(e) The Company has taken commercially reasonable steps to maintain the confidentiality of all Trade Secrets owned by the Company, including the proprietary aspects of the VeriTCE Platform, and, to the Knowledge of the Sellers, no such Trade Secrets have been disclosed to any third party other than pursuant to written confidentiality agreements that adequately protect such Trade Secrets.
Section 3.11 — Material Contracts.
(a) Schedule 3.11 sets forth a true, correct, and complete list of the following Contracts to which the Company is a party or by which the Company or any of its properties or assets is bound as of the date hereof (collectively, the "Material Contracts"):
(i) all Contracts with clinical research organizations, clinical trial sites, or investigators involving total payments in excess of Five Hundred Thousand Dollars ($500,000) per annum;
(ii) all Contracts with contract manufacturing organizations or suppliers involving total payments in excess of Five Hundred Thousand Dollars ($500,000) per annum;
(iii) all license, sublicense, or royalty agreements relating to intellectual Property (whether as licensor or licensee), other than non-exclusive licenses for commercially available off-the-shelf software;
(iv) the Investor Rights Agreement and all other Contracts among the Company and any of its stockholders relating to the governance, voting, registration, transfer, or other rights with respect to the Shares;
(v) all leases and subleases of real property, including the lease for the Company's principal facility at 550 Gateway Drive, Cambridge, Massachusetts 02142;
(vi) all Contracts involving the borrowing of money, the issuance of any note, bond, debenture, or similar instrument, or the guarantee of any obligation, in each case in excess of Two Hundred Fifty Thousand Dollars ($250,000);
(vii) all Contracts with any Governmental Authority;
(viii) all joint venture, partnership, strategic alliance, or collaboration agreements;
(ix) all Contracts that limit the freedom of the Company to compete in any line of business or with any Person or in any area or that contain "most favored nation," exclusivity, or similar provisions that restrict or limit the Company's operations;
(x) all Contracts with any Seller or any Affiliate of any Seller (other than employment agreements described in Section 3.14); and
(xi) all other Contracts not otherwise described above that involve annual payments or receipts in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that are otherwise material to the business of the Company.
(b) Each Material Contract is valid and binding on the Company and, to the Knowledge of the Sellers, on the other parties thereto, and is in full force and effect, in each case subject to the Bankruptcy and Equity Exceptions. The Company is not in material breach of or default under any Material Contract, and, to the Knowledge of the Sellers, no other party to any Material Contract is in material breach of or default under such Material Contract. The Company has not received any written notice of termination, cancellation, or material breach with respect to any Material Contract. True, correct, and complete copies of all Material Contracts (including all amendments, supplements, and modifications thereto) have been made available to Buyer.
Section 3.12 — Real Property.
The Company does not own and has never owned any real property. Schedule 3.12 sets forth a true, correct, and complete list of all real property leased, subleased, licensed, or otherwise occupied by the Company (the "Leased Real Property"), including the Company's principal facility located at 550 Gateway Drive, Cambridge, Massachusetts 02142. The Company has a valid and enforceable leasehold interest in the Leased Real Property, free and clear of all Liens (other than Permitted Liens). The Company is not in material breach of or default under any lease or sublease with respect to any Leased Real Property, and, to the Knowledge of the Sellers, no event has occurred that, with notice or lapse of time or both, would constitute a material breach of or default under any such lease or sublease.
Section 3.13 — Employee Benefit Plans.
(a) Schedule 3.13 sets forth a true, correct, and complete list of each "employee benefit plan" (as defined in Section 3(3) of ERISA), and each other compensation or benefit plan, program, policy, practice, agreement, or arrangement (including employment agreements, severance or change-in-control agreements, equity incentive plans, bonus plans, deferred compensation arrangements, and fringe benefit programs) that is maintained, contributed to, or required to be maintained or contributed to by the Company for the benefit of any current or former employee, director, officer, individual independent contractor, or consultant of the Company, or with respect to which the Company has any liability or potential liability (collectively, the "Benefit Plans").
(b) Each Benefit Plan has been established, maintained, funded, administered, and operated in compliance in all material respects with its terms and all applicable Laws, including ERISA and the Code. The Company does not maintain, contribute to, or have any obligation to contribute to, and has not at any time during the past six (6) years maintained, contributed to, or been obligated to contribute to, any (i) "defined benefit plan" (as defined in Section 3(35) of ERISA), (ii) "multiemployer plan" (as defined in Section 3(37) of ERISA), or (iii) plan subject to Title IV of ERISA or Section 412 of the Code. There are no underfunded pension obligations with respect to any Benefit Plan. All required contributions to, and all premiums with respect to, each Benefit Plan have been timely made in accordance with applicable Law and the terms of such Benefit Plan.