PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
STOCK PURCHASE AGREEMENT
by and among
PENTERRA PHARMACEUTICALS CORP.
VERIDIAN BIOSCIENCES, INC.
THE SELLERS LISTED ON EXHIBIT A HERETO
and
DAVID NG, as Stockholder Representative
Prepared by Calderwood & Harkness LLP 200 Park Avenue, 42nd Floor New York, NY 10166
Matter No. 1018-00008
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of [●], 2024 (the "Signing Date"), is entered into by and among:
PENTERRA PHARMACEUTICALS CORP., a Delaware corporation ("Buyer"), with principal offices located at 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540;
VERIDIAN BIOSCIENCES, INC., a Delaware corporation (the "Company"), with principal offices located at 550 Gateway Drive, Cambridge, MA 02142;
THE STOCKHOLDERS OF THE COMPANY listed on Exhibit A attached hereto (each, a "Seller" and collectively, the "Sellers"); and
DAVID NG, in his capacity as Stockholder Representative (the "Stockholder Representative").
Buyer, the Company, the Sellers, and the Stockholder Representative are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Sellers collectively own one hundred percent (100%) of the outstanding capital stock of the Company, consisting of all issued and outstanding shares of Common Stock and Preferred Stock (Series A, Series B, Series C, and Series D) of the Company (collectively, the "Shares");
WHEREAS, the Sellers desire to sell, transfer, assign, convey, and deliver to Buyer, and Buyer desires to purchase and acquire from the Sellers, all of the Shares for the Purchase Price set forth herein, subject to the terms and conditions of this Agreement;
WHEREAS, the Board of Directors of Buyer has approved the execution, delivery, and performance by Buyer of this Agreement and the transactions contemplated hereby (the "Transactions") and has determined that the Transactions are advisable and in the best interests of Buyer and its stockholders;
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 and the consummation of the Transactions, and (iii) recommended that the Sellers approve and adopt this Agreement and the Transactions;
WHEREAS, the Sellers holding the requisite number of Shares under the Company's Amended and Restated Certificate of Incorporation and the Delaware General Corporation Law (the "DGCL") will approve and adopt this Agreement and the Transactions by written consent in lieu of a meeting in accordance with Section 228 of the DGCL;
WHEREAS, concurrently with the execution and delivery of this Agreement, the Parties will enter into an Escrow Agreement with Fidelis National Escrow Corp., as Escrow Agent, in substantially the form attached hereto as Exhibit B, to provide for the deposit and administration of the Indemnification Escrow Amount and the Stockholder Representative Expense Fund; and
WHEREAS, concurrently with the Closing, and as a condition and inducement to the willingness of Buyer to enter into this Agreement, Dr. Julian Marek and Dr. Priya Chandrasekaran shall each execute and deliver a Non-Competition and Non-Solicitation Agreement substantially in the form attached hereto as Exhibit C.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for 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 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acquisition Proposal" means any inquiry, proposal, or offer from any Person (other than Buyer or its Affiliates) relating to (a) any merger, consolidation, share exchange, business combination, recapitalization, or similar transaction involving the Company, (b) any sale, lease, exchange, license, or other disposition, directly or indirectly, of twenty percent (20%) or more of the consolidated assets of the Company (measured by book value or fair market value), (c) any sale, issuance, or other disposition of twenty percent (20%) or more of the equity securities (or options, rights, or warrants to purchase, or securities convertible into or exchangeable for, such equity securities) of the Company, or (d) any recapitalization, restructuring, liquidation, dissolution, or similar transaction involving the Company.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. The term "Affiliate" shall be construed in a manner consistent with the meaning ascribed to such term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
"Basket Amount" means Nine Million Dollars ($9,000,000), being one percent (1%) of the Purchase Price.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which commercial banking institutions in New York, New York are authorized or required by applicable Law to be closed.
"Buyer Indemnified Parties" has the meaning set forth in Section 9.2.
"Closing" has the meaning set forth in Section 2.5.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations promulgated thereunder.
"Commitment Letter" means that certain commitment letter (Ref. CL-2024-PPCA-0607) dated June 7, 2024, by and among Buyer, Summit Ridge Capital Partners, LP, and Ironclad Trust Company, N.A., providing for a committed term loan facility in the aggregate principal amount of Five Hundred Million Dollars ($500,000,000), together with all exhibits, schedules, annexes, and fee letters attached thereto or delivered in connection therewith.
"Company intellectual Property" means all intellectual Property that is owned by, licensed to, or used or held for use by the Company in the conduct of its business as currently conducted, including the VeriTCE T-cell engager platform technology and all patents, patent applications, trade secrets, know-how, proprietary data, formulations, processes, methods, compositions of matter, and related technical information pertaining thereto.
"Confidentiality Agreement" means that certain Mutual Confidentiality and Non-Disclosure Agreement dated as of March 4, 2024, by and between Buyer and the Company, as the same may have been amended, supplemented, or otherwise modified from time to time.
"DGCL" means the Delaware General Corporation Law, as amended from time to time.
"Disclosure Schedules" means the disclosure schedules delivered by the Sellers and the Company to Buyer concurrently with the execution and delivery of this Agreement, as the same may be supplemented or updated in accordance with the terms of this Agreement.
"Environmental Laws" means all Laws relating to pollution, protection of the environment, natural resources, or human health and safety (as it relates to exposure to Hazardous Materials), including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. §§ 6901 et seq.), the Clean Air Act, as amended (42 U.S.C. §§ 7401 et seq.), the Clean Water Act, as amended (33 U.S.C. §§ 1251 et seq.), and any analogous state or local Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Agent" means Fidelis National Escrow Corp., a Florida corporation.
"Escrow Agreement" means that certain Escrow Agreement by and among Buyer, the Stockholder Representative, and the Escrow Agent, dated as of the Closing Date, substantially in the form attached hereto as Exhibit B.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"FDA" means the United States Food and Drug Administration, or any successor agency thereto.
"Fundamental Representations" means the representations and warranties set forth in Section 3.1 (Organization and Good Standing), Section 3.2 (Authorization; Binding Agreement), Section 3.3 (Capitalization), Section 3.4 (Title to Shares), Section 3.20 (Brokers' Fees), Section 4.1 (Organization and Good Standing), Section 4.2 (Authorization; Binding Agreement), and Section 4.7 (Brokers' Fees).
"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a consistent basis.
"Governmental Authority" means any federal, state, local, municipal, or foreign government or governmental or quasi-governmental body, department, commission, board, bureau, agency, or instrumentality thereof, or any court, tribunal, arbitrator, or administrative or regulatory body, including the Securities and Exchange Commission, the Food and Drug Administration, the Federal Trade Commission, the United States Department of Justice, the Internal Revenue Service, and any state or foreign equivalent of any of the foregoing.
"Hazardous Materials" means all substances defined as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," "pollutants," "contaminants," or words of similar import under any Environmental Law, including petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, radioactive materials, and per- and polyfluoroalkyl substances.
"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 filed with the FDA pursuant to 21 C.F.R. Part 312, or any successor application or procedure.
"Indemnification Cap" means One Hundred Eighty Million Dollars ($180,000,000), being twenty percent (20%) of the Purchase Price.
"Indemnification Escrow Amount" means One Hundred Eighty Million Dollars ($180,000,000), to be deposited with the Escrow Agent at the Closing pursuant to Section 2.3(a).
"intellectual Property" means all intellectual property and proprietary rights of every kind and nature, including (a) patents, patent applications (including provisional applications), patent disclosures, inventions (whether or not patentable), and all reissuances, continuations, continuations-in-part, divisionals, renewals, extensions, and re-examinations thereof, (b) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans, and Internet domain names, together with all goodwill associated therewith, and all applications, registrations, and renewals thereof, (c) copyrights and copyrightable works, and all applications, registrations, and renewals thereof, (d) trade secrets, know-how, confidential business information, technical data, processes, formulas, methods, compositions, inventions, discoveries, and improvements, (e) software (including source code, object code, firmware, and documentation), databases, and data compilations, and (f) all other intellectual property and proprietary rights recognized under applicable Law.
"Knowledge of the Company" or "Company's Knowledge" means the actual knowledge of Dr. Julian Marek (Chief Executive Officer), Dr. Priya Chandrasekaran (Chief Scientific Officer), Steven R. Kessler (Chief Financial Officer), Dr. Anne-Marie Fontaine (Vice President, Regulatory Affairs), and Rachel Stein-Goldberg (General Counsel), in each case after reasonable inquiry of their respective direct reports who would reasonably be expected to have knowledge of the relevant matter.
"Knowledge of Buyer" means the actual knowledge of Dr. Anand Rajagopal (Chief Executive Officer), Catherine M. Burgess (Chief Financial Officer), and Thomas F. Holbrook (General Counsel), in each case after reasonable inquiry of their respective direct reports who would reasonably be expected to have knowledge of the relevant matter.
"Law" means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree, writ, or other requirement or rule of law enacted, issued, promulgated, enforced, or entered by any Governmental Authority, including common law.
"Lien" means any mortgage, pledge, hypothecation, security interest, encumbrance, lien (whether statutory or otherwise), charge, claim, restriction, right of first refusal, right of first offer, preemptive right, option, easement, servitude, proxy, voting trust or agreement, transfer restriction, or other similar restriction or limitation of any kind or nature whatsoever.
"Losses" has the meaning set forth in Section 9.4.
"Material Adverse Effect" or "MAE" means any event, change, circumstance, development, 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, results of operations, financial condition, assets, or liabilities of the Company, taken as a whole, or (b) prevents or would reasonably be expected to prevent or materially impair or materially delay the ability of the Sellers or the Company to consummate the Transactions contemplated by this Agreement; provided, however, that none of the following, individually or in the aggregate, shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a "Material Adverse Effect":
(i) changes in general economic, regulatory, political, or business conditions in the United States or globally, including changes in commodity prices, currency exchange rates, or prevailing interest rates;
(ii) changes in conditions or trends generally affecting the biotechnology, biopharmaceutical, or pharmaceutical industries, including changes in reimbursement rates, drug pricing policies, or clinical trial enrollment trends;
(iii) changes in applicable Law or in GAAP (or the authoritative interpretation or enforcement of any of the foregoing) after the date of this Agreement;
(iv) pandemics (including COVID-19 and any variant thereof and any similar public health emergencies), epidemics, disease outbreaks, or other public health events, or any worsening of any of the foregoing, including any quarantine, "shelter in place," "stay at home," workforce reduction, social distancing, shutdown, closure, sequester, or similar Law, directive, guideline, or recommendation by any Governmental Authority in connection with or in response to any of the foregoing;
(v) natural disasters, weather conditions, hurricanes, earthquakes, tsunamis, floods, volcanic eruptions, wildfires, acts of God, acts of war (whether or not declared), armed hostilities, military actions, sabotage, terrorism, cyberattacks, or any escalation or worsening of any of the foregoing;
(vi) changes in the financial, banking, capital, credit, 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 any impact on relationships with customers, suppliers, licensors, licensees, contract research organizations, contract manufacturing organizations, employees, clinical trial investigators, attributable to the identity of Buyer or to the announcement or pendency of the Transactions;
provided, further, that, with respect to clauses (i) through (vi) above, such changes, events, circumstances, developments, occurrences, conditions, or effects may 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, circumstances, developments, occurrences, conditions, or effects have had a disproportionate adverse effect on the Company relative to other similarly situated companies operating primarily in the biotechnology industry in the United States.
"Net Closing Payment" means an amount equal to (a) the Purchase Price, minus (b) the Indemnification Escrow Amount, minus (c) the Stockholder Representative Expense Fund.
"Order" means any order, writ, judgment, injunction, decree, stipulation, determination, decision, ruling, award, or verdict entered, issued, made, or rendered by any Governmental Authority.
"Outside Date" means December 10, 2024, as such date may be extended pursuant to Section 8.1(b); provided that if on such date the condition set forth in Section 7.1(a) (HSR Clearance) shall not have been satisfied but all other conditions to the Closing set forth in Article VII shall have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), then either Buyer or the Stockholder Representative may, by written notice to the other Party, extend the Outside Date by an additional ninety (90) days.
"Permitted Liens" means (a) statutory Liens for current Taxes, assessments, or other governmental charges not yet due and payable or that are 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 that are not yet due and payable, (c) zoning, entitlement, building, and other land use regulations imposed by any Governmental Authority having jurisdiction over any leased real property that are not violated in any material respect by the current use or occupancy of such leased real property, (d) easements, covenants, conditions, restrictions, and other similar matters of record affecting title to any leased real property that do not materially impair the use or occupancy of such leased real property in the operation of the business of the Company as currently conducted, (e) Liens arising under the organizational documents of the Company that will be terminated at or prior to the Closing, and (f) non-exclusive licenses of intellectual Property granted by the Company in the ordinary course of business.
"Person" means any individual, corporation, partnership, limited partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority, or other entity of any kind.
"Pre-Closing Tax Period" means any taxable period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date.
"Purchase Price" means Nine Hundred Million Dollars ($900,000,000) in cash.
"R&W Insurance Policy" means the buyer-side representation and warranty insurance policy obtained (or to be obtained) by Buyer in connection with the Transactions, insuring Buyer and the other Buyer Indemnified Parties against Losses arising from breaches of or inaccuracies in the representations and warranties of the Sellers and the Company in this Agreement.
"Reverse Termination Fee" means Forty-Five Million Dollars ($45,000,000), being five percent (5%) of the Purchase Price.
"Special Representations" means, collectively, the Fundamental Representations and the Tax Representations.
"Stockholder Representative Expense Fund" means Two Million Five Hundred Thousand Dollars ($2,500,000).
"Stockholder Written Consent" means the written consent in lieu of a meeting, substantially in the form attached hereto as Exhibit D, executed by the Sellers holding the requisite number of Shares required under the DGCL and the Company's Amended and Restated Certificate of Incorporation to approve and adopt this Agreement and the Transactions.
"Straddle Period" means any taxable period that includes but does not end on the Closing Date.
"Superior Proposal" means an unsolicited, bona fide written Acquisition Proposal (with the percentages set forth in clauses (b) and (c) of the definition of "Acquisition Proposal" increased to "fifty percent (50%)" for purposes of this definition) that the Board of Directors of the Company determines in good faith (after consultation with its financial advisor and outside legal counsel) would, if consummated in accordance with its terms, result in a transaction that is more favorable to the Sellers from a financial point of view than the Transactions contemplated by this Agreement, taking into account all legal, financial, regulatory, tax, timing, likelihood of consummation, and other relevant aspects of such Acquisition Proposal, including any changes to the terms of this Agreement proposed by Buyer pursuant to Section 5.4(c) in response to such Acquisition Proposal.
"Target Termination Fee" means Thirty-Six Million Dollars ($36,000,000), being four percent (4%) of the Purchase Price.
"Tax" or "Taxes" means (a) all federal, state, local, and foreign taxes, duties, levies, imposts, and assessments of any kind whatsoever, including income, gross receipts, profits, excise, real and personal property, sales, use, ad valorem, value-added, transfer, franchise, withholding, payroll, employment, social security, workers' compensation, unemployment compensation, disability, stamp, customs, alternative or add-on minimum, estimated, environmental, and any other taxes, duties, or assessments, together with all interest, penalties, additions to tax, and additional amounts imposed with respect thereto, (b) any liability for the payment of any amounts described in clause (a) as a result of being a member of any consolidated, combined, unitary, or affiliated group, and (c) any liability for the payment of any amounts described in clauses (a) or (b) as a result of any express or implied obligation to indemnify any other Person, as a transferee or successor, by contract, or otherwise.
"Tax Representations" means the representations and warranties set forth in Section 3.16.
"Tax Return" means any return, report, information return, declaration, claim for refund, or other document (including any schedule, attachment, or amendment thereto) filed or required to be filed with any Governmental Authority with respect to Taxes.
"Transactions" means the transactions contemplated by this Agreement, including the sale and purchase of the Shares.
"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury.
"Willful Breach" has the meaning set forth in Section 8.2(b).
Section 1.2 — Interpretation; 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) means "including without limitation," (f) the word "or" shall be disjunctive but not exclusive, (g) references to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto, (h) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation, (i) the word "extent" in the phrase "to the extent" shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply "if," (j) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, (k) references to "dollars" or "$" shall mean United States dollars, (l) references to a number of "days" shall refer to calendar days unless Business Days are specified, and (m) the Parties have each participated in the negotiation and drafting of this Agreement, and if an ambiguity or question of interpretation should arise, 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 provision of this Agreement.
ARTICLE II — PURCHASE AND SALE OF SHARES
Section 2.1 — Purchase and Sale
At the Closing, upon the terms and subject to the conditions set forth in this Agreement, each Seller shall sell, transfer, assign, convey, and deliver to Buyer, and Buyer shall purchase and acquire from each Seller, all of the Shares owned by such Seller as set forth opposite such Seller's name on Exhibit A hereto, free and clear of all Liens (other than restrictions arising under applicable federal and state securities Laws). The aggregate consideration for all of the Shares shall be the Purchase Price of Nine Hundred Million Dollars ($900,000,000) in cash (the "Purchase Price"), payable at the Closing as set forth in Section 2.3. The Purchase Price shall be allocated among the Sellers on a pro rata basis in accordance with their respective ownership percentages as set forth on Exhibit A, subject to adjustment for the allocation of the Purchase Price among the various classes and series of Shares in accordance with the provisions of the Company's Amended and Restated Certificate of Incorporation (including any applicable liquidation preferences) as determined by the Company's payment agent prior to the Closing.
Section 2.2 — No Purchase Price Adjustment
The Purchase Price is fixed at Nine Hundred Million Dollars ($900,000,000) and shall not be subject to any adjustment based on the working capital, cash, indebtedness, transaction expenses, or other financial metrics of the Company as of the Closing Date or any other date. The Parties acknowledge and agree that the Purchase Price has been determined based on the Parties' assessment of the value of the Company's clinical-stage pipeline, proprietary VeriTCE platform technology, and other assets, taking into account the Company's status as a clinical-stage biopharmaceutical company without any product revenue, and that a purchase price adjustment mechanism is not appropriate or necessary under the circumstances.
Section 2.3 — Payment of Purchase Price
At the Closing, Buyer shall pay the Purchase Price as follows:
(a) Indemnification Escrow. Buyer shall deposit, or cause to be deposited, One Hundred Eighty Million Dollars ($180,000,000) (the "Indemnification Escrow Amount"), representing twenty percent (20%) of the Purchase Price, with the Escrow Agent by wire transfer of immediately available funds to the account designated by the Escrow Agent, to be held and distributed in accordance with the terms of the Escrow Agreement. The Indemnification Escrow Amount shall serve as security for the indemnification obligations of the Sellers under Article IX of this Agreement and shall be held and released in accordance with the Escrow Agreement.
(b) Stockholder Representative Expense Fund. Buyer shall deposit, or cause to be deposited, Two Million Five Hundred Thousand Dollars ($2,500,000) (the "Stockholder Representative Expense Fund") with the Escrow Agent by wire transfer of immediately available funds to a separate account designated by the Escrow Agent, for the use and benefit of the Stockholder Representative in performing its duties and obligations under this Agreement and the Escrow Agreement. The Stockholder Representative Expense Fund shall be held and released in accordance with the Escrow Agreement and the provisions of Section 10.11.
(c) Net Closing Payment. Buyer shall pay, or cause to be paid, to the Sellers (or to the payment agent designated by the Stockholder Representative in writing at least five (5) Business Days prior to the Closing) the Net Closing Payment, being an amount equal to Nine Hundred Million Dollars ($900,000,000), minus One Hundred Eighty Million Dollars ($180,000,000), minus Two Million Five Hundred Thousand Dollars ($2,500,000), equaling Seven Hundred Seventeen Million Five Hundred Thousand Dollars ($717,500,000), by wire transfer of immediately available funds to the accounts designated in writing by each Seller (or by the Stockholder Representative on behalf of the Sellers) at least three (3) Business Days prior to the Closing Date. The Net Closing Payment shall be allocated among the Sellers on a pro rata basis in accordance with their respective ownership percentages and applicable liquidation preferences as set forth on Exhibit A and as determined in accordance with the provisions of the Company's Amended and Restated Certificate of Incorporation.
Section 2.4 — Withholding
Buyer and the Escrow Agent shall each be entitled to deduct and withhold from any amounts payable pursuant to this Agreement or the Escrow Agreement such amounts as Buyer, the Escrow Agent, or any applicable withholding agent may be required to deduct and withhold under any provision of federal, state, local, or foreign Tax Law. To the extent that amounts are so withheld and timely remitted to the applicable Governmental Authority, such withheld 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. Buyer shall provide the Stockholder Representative with at least five (5) Business Days' prior written notice of any intended withholding (other than withholding required with respect to compensation payments to employees of the Company) and shall cooperate in good faith with the Stockholder Representative to minimize or eliminate any such withholding to the extent permitted by applicable Law.
Section 2.5 — Closing
The closing of the Transactions (the "Closing") shall take place at the offices of Calderwood & Harkness LLP, 200 Park Avenue, 42nd Floor, New York, New York 10166, at 10:00 a.m. Eastern Time on the third (3rd) Business Day following the date on which all conditions set forth in Article VII have been satisfied or waived (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 at such other time, date, and place as Buyer and the Stockholder Representative may mutually agree in writing (including by means of a virtual closing conducted via electronic exchange of documents and signatures). The date on which the Closing occurs is referred to herein as the "Closing Date." The Closing shall be deemed to occur and be effective as of 12:01 a.m. Eastern Time on the Closing Date for Tax and accounting purposes.
Section 2.6 — Closing Deliverables
(a) Seller Deliverables. At the Closing, the Sellers and the Company shall deliver (or cause to be delivered) to Buyer the following:
(i) stock certificates representing all of the Shares (or, in the case of uncertificated Shares, evidence of book-entry transfer to Buyer or its designee), duly endorsed in blank or accompanied by stock powers duly executed in blank, with all required stock transfer tax stamps affixed, in form and substance reasonably satisfactory to Buyer and its counsel;
(ii) a closing certificate, dated as of the Closing Date and executed by an authorized officer of the Company, certifying that the conditions set forth in Sections 7.2(a), 7.2(b), and 7.2(c) have been satisfied, substantially in the form attached hereto as Exhibit E;
(iii) a secretary's certificate of the Company, dated as of the Closing Date, certifying (A) the Company's Amended and Restated Certificate of Incorporation and bylaws (each as amended to date), (B) the resolutions of the Board of Directors of the Company approving this Agreement and the Transactions, (C) the incumbency and signatures of the officers of the Company executing this Agreement and the documents to be delivered at the Closing, and (D) the Stockholder Written Consent;
(iv) a certificate of good standing (or equivalent document) of the Company, dated not more than five (5) Business Days prior to the Closing Date, issued by the Secretary of State of the State of Delaware, and certificates of qualification and good standing from each other jurisdiction in which the Company is qualified to do business as a foreign corporation;
(v) the Escrow Agreement, duly executed by the Stockholder Representative;
(vi) written resignations, effective as of the Closing, of each director and officer of the Company as Buyer shall have requested in writing not less than five (5) Business Days prior to the Closing Date;
(vii) a certificate of non-foreign status from the Company that satisfies the requirements of Treasury Regulation Section 1.1445-2(c)(3), substantially in the form attached hereto as Exhibit G;
(viii) payoff letters and evidence of release of all Liens (other than Permitted Liens) on the assets or equity of the Company, in form and substance reasonably satisfactory to Buyer;
(ix) evidence of the termination of all related party transactions and agreements as set forth on Schedule 3.11, in form and substance reasonably satisfactory to Buyer;
(x) executed counterparts of the Non-Competition and Non-Solicitation Agreements from each of Dr. Julian Marek and Dr. Priya Chandrasekaran, substantially in the form attached hereto as Exhibit C;
(xi) a certificate from each Seller that is not an individual, certifying such Seller's authority and authorization to execute and deliver this Agreement and consummate the Transactions; and
(xii) such other documents, instruments, and certificates as Buyer may reasonably request to effectuate the Transactions, in each case in form and substance reasonably satisfactory to Buyer and its counsel.
(b) Buyer Deliverables. At the Closing, Buyer shall deliver (or cause to be delivered) to the Sellers and the Company the following:
(i) payment of the Net Closing Payment in the amount of Seven Hundred Seventeen Million Five Hundred Thousand Dollars ($717,500,000) by wire transfer of immediately available funds to the accounts designated by the Sellers (or by the Stockholder Representative on behalf of the Sellers) in accordance with Section 2.3(c);
(ii) evidence of the deposit of the Indemnification Escrow Amount in the amount of One Hundred Eighty Million Dollars ($180,000,000) with the Escrow Agent in accordance with Section 2.3(a);
(iii) evidence of the deposit of the Stockholder Representative Expense Fund in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000) with the Escrow Agent in accordance with Section 2.3(b);
(iv) a closing certificate, dated as of the Closing Date and executed by an authorized officer of Buyer, certifying that the conditions set forth in Sections 7.3(a) and 7.3(b) have been satisfied, substantially in the form attached hereto as Exhibit F;
(v) a secretary's certificate of Buyer, dated as of the Closing Date, certifying (A) Buyer's Certificate of Incorporation and bylaws (each as amended to date), (B) the resolutions of the Board of Directors of Buyer approving this Agreement and the Transactions, and (C) the incumbency and signatures of the officers of Buyer executing this Agreement and the documents to be delivered at the Closing;
(vi) the Escrow Agreement, duly executed by Buyer; and
(vii) such other documents, instruments, and certificates as the Stockholder Representative may reasonably request to effectuate the Transactions, in each case in form and substance reasonably satisfactory to the Stockholder Representative and its counsel.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
The Sellers and the Company, jointly and severally, hereby represent and warrant to Buyer as of the date hereof and as of the Closing Date (except for representations and warranties that are made as of a specific date, which shall be made only as of such specific date), subject to the exceptions, qualifications, and disclosures set forth in the corresponding sections or subsections of the Disclosure Schedules (it being agreed that disclosure of any item in any section or subsection of the Disclosure Schedules shall be deemed to be disclosed with respect to every other section or subsection of the Disclosure Schedules to the extent that the relevance of such disclosure to such other section or subsection is reasonably apparent on the face of such disclosure), as follows:
Section 3.1 — Organization and Good Standing
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 is Tidewater Registered Agents LLC, located at 838 Walker Road, Suite 21-2, Dover, Delaware 19904. The Company has all requisite corporate power and authority to own, operate, and lease its properties and assets and to carry on its business as currently conducted. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the ownership of its properties or the character of its activities is such as to require it to be so qualified, including the Commonwealth of Massachusetts, the State of California, and the State of Maryland, except where the failure to be so qualified 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 the Company's Amended and Restated Bylaws, each as amended to date and currently in effect. The Company has no Subsidiaries and does not own, directly or indirectly, any equity interest in any other Person.
Section 3.2 — Authorization; Binding Agreement
The execution, delivery, and performance by the Company of this Agreement and each of the ancillary agreements to which the Company is a party, and the consummation by the Company of the Transactions, have been duly and validly authorized by all necessary corporate action on the part of the Company, including the unanimous approval of the Board of Directors of the Company. Each Seller has all necessary power and authority to execute, deliver, and perform this Agreement and to consummate the Transactions. The Stockholder Written Consent, when duly executed and delivered by the Sellers holding the requisite number of Shares in accordance with Section 228 of the DGCL and the Company's Amended and Restated Certificate of Incorporation, shall constitute the only stockholder approval required under the DGCL, the Company's organizational documents, and any other applicable Law for the approval and adoption of this Agreement and the Transactions. This Agreement has been duly executed and delivered by the Company and each Seller, and, assuming the due authorization, execution, and delivery of this Agreement by Buyer, this Agreement constitutes the legal, valid, and binding obligation of the Company and each Seller, enforceable against the Company and each Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar Laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 3.3 — Capitalization
(a) The authorized capital stock of the Company consists of (i) 50,000,000 shares of Common Stock, par value $0.001 per share, of which 12,840,000 shares are issued and outstanding as of the date hereof, and (ii) 40,000,000 shares of Preferred Stock, par value $0.001 per share, designated as follows: 5,000,000 shares of Series A Preferred Stock, of which 4,200,000 shares are issued and outstanding; 7,500,000 shares of Series B Preferred Stock, of which 6,800,000 shares are issued and outstanding; 10,000,000 shares of Series C Preferred Stock, of which 9,400,000 shares are issued and outstanding; and 12,000,000 shares of Series D Preferred Stock, of which 11,200,000 shares are issued and outstanding. The major stockholders and their respective ownership percentages on a fully diluted basis 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%); holders under the Company's 2018 Equity Incentive Plan (9.8% in the aggregate); and other institutional and individual investors (approximately 13.5% in the aggregate). A complete and accurate capitalization table setting forth the ownership of all outstanding Shares on both an issued-and-outstanding and a fully diluted basis is set forth on Schedule 3.3.
(b) The Company's 2018 Equity Incentive Plan (the "Equity Incentive Plan") provides for the issuance of stock options, restricted stock, and other equity awards covering shares of Common Stock of the Company representing, in the aggregate, 9.8% of the Company's fully diluted equity. Schedule 3.3 sets forth a complete list of all outstanding options and other equity awards under the Equity Incentive Plan, including the holder thereof, the date of grant, the number of shares subject thereto, the exercise price or purchase price thereof, and the vesting schedule applicable thereto.
(c) Except as set forth on Schedule 3.3, there are no outstanding (i) shares of capital stock or other equity interests of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other equity interests of the Company, (iii) options, warrants, rights of first refusal, rights of first offer, preemptive rights, anti-dilution rights, subscriptions, calls, or other rights, agreements, arrangements, or commitments of any character obligating the Company to issue, sell, transfer, redeem, or repurchase any shares of its capital stock or other equity interests, or (iv) voting trusts, stockholder agreements, proxies, or similar agreements or understandings to which the Company is a party or by which the Company is bound with respect to the voting, transfer, or other disposition of the capital stock of the Company.
(d) All issued and outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable. None of the outstanding Shares were issued in violation of any applicable securities Laws, and all outstanding Shares were issued in compliance with all applicable federal and state securities Laws. No outstanding Shares are subject to any repurchase option, forfeiture provision, or right of first refusal in favor of the Company.
Section 3.4 — Title to Shares
Each Seller is the record and beneficial owner of, and has good and valid title to, the Shares set forth opposite such Seller's name on Exhibit A, free and clear of all Liens (other than restrictions under applicable federal and state securities Laws and restrictions on transfer set forth in the Company's organizational documents and any stockholders' agreement to which such Seller is a party, all of which shall be terminated at or prior to the Closing). At the Closing, upon delivery of the Shares as contemplated by this Agreement against payment of the applicable portion of the Purchase Price, Buyer will acquire from each Seller good and valid title to such Seller's Shares, free and clear of all Liens (other than Liens created by Buyer and restrictions under applicable federal and state securities Laws).
Section 3.5 — No Conflicts; Consents
(a) The execution, delivery, and performance of this Agreement by the Company and each Seller, and the consummation by the Company and each Seller of the Transactions, do not and will not (i) violate, conflict with, or result in a breach of any provision of the Company's Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, (ii) violate or conflict with any Law or Order applicable to the Company or any Seller or by which any of the properties or assets of the Company are bound, (iii) result in a violation or breach of, or constitute (with or without notice or lapse of time, or both) a default under, or give rise to any right of termination, cancellation, amendment, or acceleration under, or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Company under, any material contract, agreement, instrument, permit, franchise, or license to which the Company is a party or by which the Company or any of its properties or assets are bound, or (iv) require any consent, approval, authorization, or permit of, or filing, declaration, notification, or registration with, any Governmental Authority, except (A) compliance with the notification and waiting period requirements of the HSR Act, (B) such filings as may be required under applicable state securities or "blue sky" Laws, and (C) such other consents, approvals, authorizations, permits, filings, declarations, notifications, or registrations as are set forth on Schedule 3.5, the failure of which to obtain or make would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Schedule 3.5 sets forth a complete and accurate list of all consents, waivers, approvals, authorizations, and notices required to be obtained or given by the Company or any Seller in connection with the execution, delivery, and performance of this Agreement and the consummation of the Transactions, including consents required under the material contracts listed on Schedule 3.11.
Section 3.6 — Financial Statements
(a) The Company has delivered to Buyer true, correct, and complete copies of (i) the audited consolidated financial statements of the Company, consisting of the balance sheet, statements of operations, statements of stockholders' equity (deficit), and statements of cash flows for each of the fiscal years ended December 31, 2021, December 31, 2022, and December 31, 2023 (collectively, the "Annual Financial Statements"), together with the reports of Northbridge Accounting Group LLP (engagement partner: Patrick Calloway, CPA) thereon, and (ii) the unaudited interim financial statements of the Company consisting of the balance sheet and statements 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"). The Financial Statements are set forth on Schedule 3.6.
(b) The Financial Statements (i) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods indicated (except that the Interim Financial Statements are subject to normal year-end audit adjustments and do not contain footnotes), and (ii) present fairly, in all material respects, the financial condition, results of operations, and cash flows of the Company as of the dates thereof and for the periods indicated therein. Without limiting the generality of the foregoing, the Company is a clinical-stage biopharmaceutical company and had no product revenue for any of the periods covered by the Financial Statements. For the fiscal year ended December 31, 2023, the Company reported total revenue of $0, total operating expenses of approximately $94,700,000, and a net loss of approximately ($87,300,000). As of March 31, 2024, the Company had cash and cash equivalents of approximately $112,400,000.
(c) Northbridge Accounting Group LLP is, and at all times during its engagement by the Company has been, independent of the Company and its Affiliates as required by applicable professional standards.
Section 3.7 — Absence of Certain Changes
(a) Since December 31, 2023 through the date of this Agreement, the Company has conducted its business in the ordinary course of business consistent with past practice in all material respects.
(b) Since December 31, 2023 through the date of this Agreement, there has not been any event, change, circumstance, development, occurrence, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth on Schedule 3.7, since December 31, 2023 through the date of this Agreement, the Company has not:
(i) declared, set aside, authorized, or paid any dividend or other distribution (whether in cash, stock, property, or otherwise) with respect to any of its capital stock, or redeemed, repurchased, or otherwise acquired or retired any of its capital stock;
(ii) issued, sold, pledged, disposed of, encumbered, or granted any shares of its capital stock or other equity interests, or any options, warrants, convertible securities, or other rights to acquire any shares of its capital stock or other equity interests;
(iii) amended or modified its Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, or other organizational documents;
(iv) made any capital expenditure or commitment therefor in excess of $500,000 individually or $1,500,000 in the aggregate;
(v) acquired or disposed of (by merger, consolidation, acquisition of stock or assets, or otherwise) any business, corporation, partnership, or other business organization or division thereof, or any material assets;
(vi) incurred, assumed, or guaranteed any indebtedness for borrowed money, or mortgaged, pledged, or subjected to any Lien (other than Permitted Liens) any of its material assets;
(vii) made any change in its accounting methods, principles, or practices, except as required by changes in GAAP;
(viii) entered into, amended, modified, terminated, or waived any material provision of any material contract;
(ix) settled or compromised any material claim, action, suit, or proceeding;
(x) granted any increase in the compensation or benefits payable to any director, officer, employee, or independent contractor, other than ordinary course increases consistent with past practice;
(xi) hired or terminated (other than for cause) any employee whose annual base compensation exceeds $250,000;
(xii) adopted, amended, or terminated any employee benefit plan, except as required by applicable Law;
(xiii) made any material change to any clinical trial protocol, or commenced or terminated any material clinical trial; or
(xiv) authorized, agreed, committed, or entered into any binding agreement or understanding to do any of the foregoing.
Section 3.8 — No Undisclosed Liabilities
The Company does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent, or otherwise, and whether due or to become due), except (a) liabilities that are reflected or reserved against in the Annual Financial Statements for the fiscal year ended December 31, 2023 or disclosed in the notes thereto, (b) liabilities that have arisen since December 31, 2023 in the ordinary course of business consistent with past practice (none of which results from, arises out of, or relates to any breach of contract, breach of warranty, tort, infringement, or violation of Law), (c) liabilities set forth on Schedule 3.8, and (d) liabilities that, individually or in the aggregate, are not material to the Company, taken as a whole.
Section 3.9 — Real Property
(a) The Company does not own, and has never owned, any real property.
(b) Schedule 3.9 sets forth a complete and accurate list of all real property currently leased, subleased, licensed, or otherwise occupied by the Company (the "Leased Real Property"), together with a description of each applicable lease, sublease, or license agreement (each, a "Lease"). The Company's principal leased facility is located at 550 Gateway Drive, Cambridge, Massachusetts 02142, which serves as the Company's headquarters and primary research and development facility.
(c) With respect to each Lease: (i) such Lease is legal, valid, binding, enforceable, and in full force and effect, subject to customary enforceability exceptions; (ii) neither the Company nor, to the Knowledge of the Company, any other party to such Lease is in breach of or default under such Lease, and no event has occurred that, with the giving of notice or the passage of time, or both, would constitute a breach or default thereunder; and (iii) the Company has not subleased, assigned, or otherwise granted to any Person the right to use or occupy any portion of the Leased Real Property.
Section 3.10 — Intellectual Property
(a) Ownership; Sufficiency. The Company owns or has valid and enforceable rights to use all Company intellectual Property necessary for and material to the conduct of its business as currently conducted, including the Company's proprietary VeriTCE bispecific T-cell engager platform technology. To the Knowledge of the Company, the Company intellectual Property constitutes all intellectual Property necessary to conduct the business of the Company as currently conducted and as currently proposed to be conducted.
(b) Patents and Patent Applications. Schedule 3.10(a) sets forth a complete and accurate list of all patents and patent applications owned by or exclusively licensed to the Company (the "Company Patents"), including the jurisdiction, patent or application number, filing date, issuance date (if applicable), and current status thereof. The Company Patents include composition-of-matter and method-of-use patents and patent applications relating to the Company's lead product candidate, VRD-4187, and the VeriTCE platform. All required maintenance fees, annuities, and other payments have been timely paid, and all necessary documents and certificates have been timely filed, in connection with such Company Patents. To the Knowledge of the Company, all issued Company Patents are valid and enforceable.
(c) Trademarks. Schedule 3.10(b) sets forth a complete and accurate list of all registered trademarks and pending trademark applications owned by the Company.
(d) IP Licenses. Schedule 3.10(c) sets forth a complete and accurate list of all material agreements pursuant to which any third party has licensed or granted to the Company any rights to use intellectual Property (other than off-the-shelf commercially available software licensed on standard terms) and all material agreements pursuant to which the Company has licensed or granted any rights to any third party to use Company intellectual Property. The Company is not in breach of any such agreement, and, to the Knowledge of the Company, no other party to any such agreement is in breach thereof.
(e) No Infringement. To the Knowledge of the Company, the conduct of the Company's business as currently conducted does not infringe, misappropriate, or otherwise violate the intellectual Property rights of any Person. There are no claims, actions, suits, proceedings, or investigations pending or, to the Knowledge of the Company, threatened alleging that the Company has infringed, misappropriated, or otherwise violated the intellectual Property rights of any Person. To the Knowledge of the Company, no Person is currently infringing, misappropriating, or otherwise violating any Company intellectual Property.
(f) Assignment of IP. Each of Dr. Julian Marek and Dr. Priya Chandrasekaran has executed and delivered to the Company a valid and enforceable invention assignment, confidentiality, and non-disclosure agreement, pursuant to which such individual has assigned to the Company all right, title, and interest in and to all intellectual Property conceived, developed, or reduced to practice by such individual in connection with such individual's employment or engagement by the Company. All other current and former employees, consultants, and contractors of the Company who have contributed to the creation or development of any material Company intellectual Property have executed and delivered to the Company valid and enforceable invention assignment, confidentiality, and non-disclosure agreements containing substantially similar assignment provisions.
(g) Trade Secret Protection. The Company has taken commercially reasonable measures to protect the secrecy, confidentiality, and value of all trade secrets included in the Company intellectual Property, including requiring all employees, consultants, and contractors with access to such trade secrets to execute written confidentiality agreements and implementing appropriate physical, electronic, and procedural safeguards.
Section 3.11 — Material Contracts
(a) Schedule 3.11 sets forth a complete and accurate list, as of the date hereof, of each of the following contracts, agreements, instruments, and arrangements to which the Company is a party or by which the Company or any of its properties or assets is bound (collectively, the "Material Contracts"):
(i) each contract involving aggregate consideration or payments in excess of $1,000,000 per annum;
(ii) each contract with a clinical research organization, contract manufacturing organization, or other significant service provider relating to the Company's product candidates;
(iii) each license agreement, collaboration agreement, co-development agreement, or other agreement relating to the use, development, or commercialization of intellectual Property;
(iv) each investor rights agreement, registration rights agreement, voting agreement, stockholders' agreement, or right of first refusal agreement, including the Amended and Restated Investor Rights Agreement by and among the Company, Crestline Ventures, LP, Boreal Health Partners Fund III, LP, Apex Growth Equity Fund II, LP, and certain other stockholders;
(v) each contract relating to indebtedness for borrowed money or any guarantee thereof;
(vi) each Lease;
(vii) each contract containing any covenant restricting the Company's ability to compete in any business or geographic area, or restricting the Company's ability to solicit or hire any Person;
(viii) each contract with any current or former officer, director, or Affiliate of the Company (including all related party transactions);
(ix) each contract providing for indemnification obligations of the Company in excess of $500,000; and
(x) each other contract that is material to the business, results of operations, or financial condition of the Company.
(b) Each Material Contract is a valid, binding, and enforceable obligation of the Company and, to the Knowledge of the Company, of each other party thereto, subject to customary enforceability exceptions. Neither the Company nor, to the Knowledge of the Company, any other party thereto is in material breach of or default under any Material Contract, and no event has occurred that, with the giving of notice or the passage of time, or both, would constitute a material breach or default under any Material Contract or give any party the right to terminate, accelerate, or modify any Material Contract. The Company has made available to Buyer true, correct, and complete copies of all Material Contracts (including all amendments, supplements, and modifications thereto).
Section 3.12 — Litigation
Except as set forth on Schedule 3.12, there is no claim, action, suit, proceeding, arbitration, mediation, or investigation (each, a "Proceeding") pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its properties or assets, at law or in