STOCKHOLDER REPRESENTATIVE AGREEMENT
dated as of
June 10, 2024
among
PENTERRA PHARMACEUTICALS CORP.,
DAVID NG, as Stockholder Representative,
and
VERIDIAN BIOSCIENCES, INC.
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This STOCKHOLDER REPRESENTATIVE AGREEMENT (this "Agreement") is entered into as of June 10, 2024, by and among:
(1) Penterra Pharmaceuticals Corp., a Delaware corporation ("Buyer"), with its principal offices located at 1100 Meridian Boulevard, Suite 400, Princeton, New Jersey 08540;
(2) David Ng, an individual, acting in his capacity as Stockholder Representative (the "Stockholder Representative") and in his capacity as Managing Partner of Crestline Ventures, LP, a Delaware limited partnership; and
(3) Veridian Biosciences, Inc., a Delaware corporation (the "Company"), with its principal offices located at 550 Gateway Drive, Cambridge, Massachusetts 02142.
The Buyer, the Stockholder Representative, and the Company are referred to herein individually as a "Party" and collectively as the "Parties."
This Agreement is entered into in connection with that certain Stock Purchase Agreement, dated as of June 10, 2024 (as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms, the "Purchase Agreement"), by and among the Buyer, the Company, the stockholders of the Company listed on the signature pages thereto (each, a "Seller" and collectively, the "Sellers"), and the Stockholder Representative. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Purchase Agreement.
RECITALS
WHEREAS, the Buyer, the Company, the Sellers, and the Stockholder Representative have entered into the Purchase Agreement, dated as of June 10, 2024, pursuant to which the Buyer has agreed to acquire one hundred percent (100%) of the outstanding capital stock of the Company (on a fully diluted basis) for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash (the "Purchase Price"), subject to the terms and conditions set forth in the Purchase Agreement;
WHEREAS, the Purchase Agreement provides for the deposit at Closing of (i) One Hundred Eighty Million Dollars ($180,000,000) (the "Indemnification Escrow Amount," representing twenty percent (20%) of the Purchase Price) and (ii) Two Million Five Hundred Thousand Dollars ($2,500,000) (the "Stockholder Representative Expense Fund") with Fidelis National Escrow Corp., a Florida corporation (the "Escrow Agent"), pursuant to the Escrow Agreement, dated as of June 10, 2024, by and among the Buyer, the Stockholder Representative, and the Escrow Agent (the "Escrow Agreement");
WHEREAS, the Purchase Agreement contemplates the appointment of a Stockholder Representative to act on behalf of the Sellers in connection with certain post-Closing matters, including, without limitation, indemnification claims under Article IX of the Purchase Agreement, escrow distributions under the Escrow Agreement, and other obligations arising under or in connection with the Purchase Agreement and the related transaction documents;
WHEREAS, the Sellers holding in excess of ninety percent (90%) of the outstanding capital stock of the Company (calculated on a fully diluted basis), including Crestline Ventures, LP (holding approximately twenty-eight and three-tenths percent (28.3%)), Boreal Health Partners Fund III, LP (holding approximately nineteen and seven-tenths percent (19.7%)), and Apex Growth Equity Fund II, LP (holding approximately fourteen and one-tenth percent (14.1%)), have approved the appointment of David Ng as the Stockholder Representative and have authorized him to act on their behalf as set forth herein and in the Purchase Agreement; and
WHEREAS, David Ng is willing to serve as Stockholder Representative on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1 — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the following meanings:
"Buyer's Counsel" means Calderwood & Harkness LLP, 200 Park Avenue, 42nd Floor, New York, New York 10166.
"Escrow Agent" means Fidelis National Escrow Corp., a Florida corporation, with offices at 601 Riverside Avenue, Jacksonville, Florida 32204.
"Escrow Agreement" means the Escrow Agreement, dated as of June 10, 2024, by and among the Buyer, the Stockholder Representative, and the Escrow Agent, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Indemnification Basket" means Nine Million Dollars ($9,000,000), representing one percent (1%) of the Purchase Price. As more particularly described in the Purchase Agreement, the Indemnification Basket is a "tipping basket" and not a true deductible; accordingly, once the aggregate amount of indemnifiable Losses exceeds the Indemnification Basket, the Sellers shall be liable for the full amount of such Losses from the first dollar, subject to the applicable Indemnification Cap.
"Indemnification Cap" means One Hundred Eighty Million Dollars ($180,000,000), representing twenty percent (20%) of the Purchase Price, as more particularly set forth in Section 9.2 of the Purchase Agreement.
"Indemnification Escrow Amount" means One Hundred Eighty Million Dollars ($180,000,000), representing twenty percent (20%) of the Purchase Price, deposited with the Escrow Agent at Closing in accordance with the Purchase Agreement and the Escrow Agreement.
"Outside Date" means December 10, 2024, being one hundred eighty (180) days after the date of execution of the Purchase Agreement.
"Pro Rata Share" means, with respect to each Seller, the percentage of the aggregate Purchase Price to which such Seller is entitled, determined by reference to the number of shares of Company capital stock (on a fully diluted basis) held by such Seller immediately prior to the Closing relative to the total number of outstanding shares of Company capital stock (on a fully diluted basis) immediately prior to the Closing, as set forth on Exhibit A hereto.
"Purchase Agreement" means the Stock Purchase Agreement, dated as of June 10, 2024, by and among the Buyer, the Company, the Sellers, and the Stockholder Representative, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Sellers' Counsel" means Zalcourt Archer & Cole LLP, One Federal Street, 30th Floor, Boston, Massachusetts 02110 (lead partner: Rebecca Whitmore).
"Special/Fundamental Representations Indemnification Cap" means Nine Hundred Million Dollars ($900,000,000), representing one hundred percent (100%) of the Purchase Price, applicable to indemnification claims arising from breaches of Fundamental Representations or Tax Representations, as more particularly set forth in Section 9.2 of the Purchase Agreement.
"Stockholder Representative Expense Fund" means Two Million Five Hundred Thousand Dollars ($2,500,000), deposited with the Escrow Agent at Closing in accordance with the Purchase Agreement and the Escrow Agreement for use by the Stockholder Representative as set forth in Article 4 of this Agreement.
All other capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Purchase Agreement, including, without limitation, the terms "Closing," "Closing Date," "Fundamental Representations," "Losses," "Material Adverse Effect," "Survival Period," and "Tax Representations," each as defined in Section 1.1 of the Purchase Agreement.
Section 1.2 — Rules of Construction
The rules of construction and interpretation set forth in Section 1.2 of the Purchase Agreement are hereby incorporated by reference into this Agreement, mutatis mutandis, and shall apply to this Agreement as if fully set forth herein. Without limiting the generality of the foregoing:
(a) References to "Articles," "Sections," and "Exhibits" shall refer to the Articles, Sections, and Exhibits of this Agreement, unless otherwise specified.
(b) The words "hereof," "herein," "hereunder," and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(c) The use of the masculine, feminine, or neuter gender or the singular or plural form of any word shall include each other gender and form, as the context may require.
(d) The word "including" and words of similar import shall mean "including, without limitation."
(e) The word "or" shall not be exclusive.
(f) Any reference to a statute or regulation shall include all amendments thereto, and any successor statute or regulation.
(g) This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof.
ARTICLE 2 — APPOINTMENT AND ACCEPTANCE
Section 2.1 — Appointment of Stockholder Representative
Each Seller, by executing the Purchase Agreement and/or by virtue of being bound thereby, hereby irrevocably constitutes and appoints David Ng, in his capacity as Managing Partner of Crestline Ventures, LP, as the Stockholder Representative, to serve as such Seller's exclusive agent, attorney-in-fact, and representative, with full power and authority to act on behalf of such Seller and such Seller's successors, assigns, heirs, executors, administrators, and legal representatives, in connection with all matters arising under or relating to this Agreement, the Purchase Agreement, the Escrow Agreement, and the ancillary transaction documents, as more particularly described in Article 3 hereof.
This appointment is coupled with an interest and is irrevocable. No Seller shall have the right to revoke this appointment except as part of a removal of the Stockholder Representative in accordance with Section 8.2 of this Agreement. This appointment shall be binding upon and shall inure to the benefit of the successors, assigns, heirs, executors, administrators, and legal representatives of each Seller.
The Stockholder Representative shall serve in such capacity from the date of this Agreement until the later of (a) the final release or distribution of all amounts held in the Indemnification Escrow in accordance with the Escrow Agreement and (b) the final resolution (including by settlement, final non-appealable judgment, or expiration of the applicable Survival Period without a pending claim) of all pending or threatened indemnification claims under Article IX of the Purchase Agreement.
Section 2.2 — Acceptance
David Ng hereby accepts the appointment as Stockholder Representative and agrees to perform the duties and exercise the authority granted to him herein and in the Purchase Agreement, subject to the terms and conditions of this Agreement. The Stockholder Representative confirms that he has reviewed the Purchase Agreement (including all Disclosure Schedules delivered in connection therewith), the Escrow Agreement, and the other ancillary transaction documents, and that he has had the opportunity to consult with legal counsel regarding the scope and nature of his duties and obligations hereunder.
Section 2.3 — Capacity
The Stockholder Representative acts solely in a representative capacity for and on behalf of the Sellers and shall not be personally liable for any debts, obligations, or liabilities of the Sellers arising under or in connection with the Purchase Agreement, the Escrow Agreement, or this Agreement. The Stockholder Representative is not a guarantor of the obligations of any Seller and shall not be deemed to have assumed any obligation or liability of any Seller by virtue of serving as Stockholder Representative. Crestline Ventures, LP, as the holder of approximately twenty-eight and three-tenths percent (28.3%) of the fully diluted equity of the Company and as the single largest stockholder, acknowledges and supports the appointment of David Ng as Stockholder Representative and confirms that such appointment has been duly authorized by all requisite action on the part of Crestline Ventures, LP.
ARTICLE 3 — AUTHORITY AND POWERS
Section 3.1 — General Authority
Subject to the limitations set forth in Section 3.3, the Stockholder Representative is hereby granted full power and authority to act on behalf of all Sellers, and to bind all Sellers, in connection with any and all matters arising under or relating to the Purchase Agreement, the Escrow Agreement, and the ancillary transaction documents. The Stockholder Representative shall have the authority to take any and all actions and to make any and all decisions required or permitted to be taken or made by the Sellers (or any of them) under or in connection with the Purchase Agreement, the Escrow Agreement, and the ancillary transaction documents, without obtaining the further consent, approval, or authorization of any individual Seller, except as expressly provided in Section 3.3 hereof. Each Seller shall be bound by all actions taken and decisions made by the Stockholder Representative in accordance with the terms of this Agreement and the Purchase Agreement, and no Seller shall have the right to object to, dissent from, or otherwise challenge any such action or decision, except in the case of fraud, willful misconduct, or gross negligence by the Stockholder Representative.
Section 3.2 — Specific Powers
Without limiting the generality of Section 3.1, the Stockholder Representative shall have the specific power and authority to take the following actions on behalf of the Sellers:
(a) Notices and Communications. Receiving, reviewing, and responding to all notices, communications, and deliveries from the Buyer, the Company (post-Closing), the Escrow Agent, or any other Person under or in connection with the Purchase Agreement, the Escrow Agreement, or the ancillary transaction documents, including any deficiency notices, termination notices, indemnification claim notices, or other notices required or permitted thereunder.
(b) Indemnification Claims. Negotiating, contesting, compromising, and settling any and all indemnification claims made by the Buyer or any other Buyer Indemnified Party under Article IX of the Purchase Agreement, including claims for Losses arising from breaches of representations, warranties, covenants, and agreements of the Sellers and the Company, subject to the Indemnification Cap of One Hundred Eighty Million Dollars ($180,000,000) for general representations and the Special/Fundamental Representations Indemnification Cap of Nine Hundred Million Dollars ($900,000,000) for Fundamental Representations and Tax Representations.
(c) Escrow Instructions. Delivering joint written instructions (or, where permitted, sole written instructions) to the Escrow Agent (Fidelis National Escrow Corp.) regarding releases, disbursements, and distributions from the Indemnification Escrow Amount (One Hundred Eighty Million Dollars ($180,000,000)) and the Stockholder Representative Expense Fund (Two Million Five Hundred Thousand Dollars ($2,500,000)), in each case in accordance with the terms and conditions of the Escrow Agreement.
(d) Engagement of Advisors. Engaging, retaining, and directing legal counsel (including Zalcourt Archer & Cole LLP or any successor or replacement counsel selected by the Stockholder Representative), accountants, tax advisors, financial advisors, investment bankers, and other professionals and experts as the Stockholder Representative deems necessary or appropriate in connection with the performance of his duties hereunder, at the expense of the Stockholder Representative Expense Fund (and, if the Stockholder Representative Expense Fund is insufficient, at the expense of the Sellers in accordance with their Pro Rata Shares, subject to Section 4.5).
(e) Litigation and Dispute Resolution. Commencing, prosecuting, defending, and settling any and all litigation, arbitration, mediation, or other legal or equitable proceedings on behalf of the Sellers arising out of or relating to the Purchase Agreement, the Escrow Agreement, or the ancillary transaction documents, including proceedings in the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines jurisdiction, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware), as provided in the exclusive jurisdiction provisions set forth in Section 10.6 of the Purchase Agreement.
(f) Amendments, Waivers, and Consents. Executing, delivering, and performing amendments, waivers, consents, supplements, and modifications to the Purchase Agreement, the Escrow Agreement, and the ancillary transaction documents on behalf of the Sellers, subject to the limitations set forth in Section 3.3.
(g) Determinations and Elections. Making any and all determinations, decisions, and elections required or permitted to be made by the Sellers under the Purchase Agreement, including, without limitation, determinations with respect to: (i) the application of the Indemnification Basket (Nine Million Dollars ($9,000,000) tipping basket); (ii) the applicable Survival Periods (eighteen (18) months post-Closing for general representations and warranties; the full applicable statute of limitations plus sixty (60) days for Fundamental Representations and Tax Representations); (iii) dispute resolution procedures under the Purchase Agreement; and (iv) any other matters requiring the action or consent of the Sellers.
(h) Receipt of Payments. Receiving, on behalf of the Sellers, (i) the net Closing payment (Seven Hundred Seventeen Million Five Hundred Thousand Dollars ($717,500,000), representing the Purchase Price less the Indemnification Escrow Amount and the Stockholder Representative Expense Fund), (ii) any distributions from the Indemnification Escrow Amount upon release thereof in accordance with the Escrow Agreement, and (iii) any distributions from the Stockholder Representative Expense Fund upon release of any remaining balance thereof.
(i) Tax Matters. Reviewing, approving, and disputing any calculations, determinations, or elections related to pre-Closing tax periods, including matters relating to the Company's federal net operating loss carryforward of approximately Three Hundred Twelve Million Dollars ($312,000,000) and any limitations arising under Section 382 of the Internal Revenue Code of 1986, as amended, as a result of the transactions contemplated by the Purchase Agreement, and any allocations of the Purchase Price for federal, state, and local income tax purposes.
(j) Specific Performance. Taking all actions in connection with the specific performance provisions set forth in Section 10.12 of the Purchase Agreement, including seeking orders of specific performance and injunctive relief on behalf of the Sellers.
(k) General Authority. Taking any and all other actions and doing any and all other things that are reasonably necessary, appropriate, or desirable to carry out the intent and purposes of this Agreement, the Purchase Agreement, the Escrow Agreement, and the ancillary transaction documents.
Section 3.3 — Limitations on Authority
Notwithstanding the broad grant of authority set forth in Sections 3.1 and 3.2, the Stockholder Representative shall not have the authority to:
(a) Amend, modify, or waive any provision of the Purchase Agreement, the Escrow Agreement, or any ancillary transaction document in a manner that would disproportionately and adversely affect any individual Seller relative to the other Sellers (other than in proportion to such Seller's Pro Rata Share) without the prior written consent of such adversely affected Seller;
(b) Settle any indemnification claim that would require payment by, or the assumption of liability by, any individual Seller in an amount in excess of such Seller's Pro Rata Share of the Indemnification Escrow Amount (or, in the case of claims relating to Fundamental Representations or Tax Representations, such Seller's Pro Rata Share of the applicable indemnification obligations) without the prior written consent of such adversely affected Seller; or
(c) Consent to any amendment of this Agreement without the prior written consent of Sellers holding a majority-in-interest (measured by Pro Rata Share) of the Sellers.
Section 3.4 — Reliance by Buyer and Third Parties
The Buyer, the Escrow Agent (Fidelis National Escrow Corp.), and any other third party dealing with the Stockholder Representative shall be entitled to conclusively and absolutely rely upon the authority of the Stockholder Representative as set forth herein, without independent inquiry or investigation, and shall not be required to inquire into the authority of the Stockholder Representative to take any particular action or obtain confirmation or consent from any individual Seller prior to acting upon any instruction, direction, notice, or communication delivered by the Stockholder Representative. Any action taken by the Stockholder Representative within the scope of his authority hereunder shall bind all Sellers as though each Seller had personally taken such action. None of the Buyer, the Escrow Agent, or any other third party shall have any liability to any Seller for acting in reliance upon the instructions or directions of the Stockholder Representative.
ARTICLE 4 — STOCKHOLDER REPRESENTATIVE EXPENSE FUND
Section 4.1 — Establishment and Funding
At the Closing, Two Million Five Hundred Thousand Dollars ($2,500,000) shall be withheld from the aggregate Purchase Price otherwise payable to the Sellers and deposited with the Escrow Agent (Fidelis National Escrow Corp.) as the Stockholder Representative Expense Fund, in accordance with Section 2.3(b) of the Purchase Agreement and the terms of the Escrow Agreement. The Stockholder Representative Expense Fund shall be held in a segregated, interest-bearing account maintained by the Escrow Agent, and any interest earned thereon shall be added to and become part of the Stockholder Representative Expense Fund. The Stockholder Representative Expense Fund shall be the property of the Sellers (subject to the Stockholder Representative's right to direct disbursements therefrom in accordance with this Article 4), and the withholding of the Stockholder Representative Expense Fund from the Purchase Price shall be treated as received by the Sellers for all purposes, including for federal, state, and local income tax purposes.
Section 4.2 — Permitted Uses
The Stockholder Representative may use the Stockholder Representative Expense Fund solely for the following purposes:
(a) Legal fees and expenses of counsel engaged by the Stockholder Representative in connection with his duties hereunder, including fees and expenses of Zalcourt Archer & Cole LLP and any other counsel retained by the Stockholder Representative;
(b) Accounting, tax advisory, and financial advisory fees and expenses incurred by the Stockholder Representative in connection with the review, analysis, or dispute of any matter arising under the Purchase Agreement, the Escrow Agreement, or this Agreement;
(c) Costs and expenses incurred in contesting, defending, or settling any indemnification claim made by the Buyer or any other Buyer Indemnified Party under Article IX of the Purchase Agreement;
(d) Costs and expenses of any litigation, arbitration, mediation, or other legal proceeding commenced or defended by the Stockholder Representative on behalf of the Sellers;
(e) Administrative costs of the Stockholder Representative incurred in performing his duties under this Agreement, including reasonable out-of-pocket expenses for travel, communications, and document reproduction; and
(f) Any other costs and expenses reasonably incurred by the Stockholder Representative in connection with the discharge of his duties and obligations under this Agreement or the Purchase Agreement.
Section 4.3 — Disbursement Procedures
The Stockholder Representative shall deliver written instructions to the Escrow Agent for disbursements from the Stockholder Representative Expense Fund, substantially in the form attached hereto as Exhibit B (or in such other form as may be acceptable to the Escrow Agent). No joint instruction from the Buyer shall be required for disbursements from the Stockholder Representative Expense Fund; the Stockholder Representative shall have the sole and exclusive right to direct the Escrow Agent with respect to disbursements from the Stockholder Representative Expense Fund. This provision is intended to distinguish the Stockholder Representative Expense Fund from the Indemnification Escrow Amount, which requires either joint written instruction from the Buyer and the Stockholder Representative, or an order of a court of competent jurisdiction, for the release of any funds therefrom. The Stockholder Representative shall maintain reasonable books and records of all disbursements from the Stockholder Representative Expense Fund, including the amount, date, payee, and purpose of each disbursement, and shall make such records available for inspection by any Seller upon reasonable request.
Section 4.4 — Distribution of Remaining Balance
Upon the final resolution of all indemnification claims under Article IX of the Purchase Agreement and the expiration of all applicable Survival Periods, any remaining balance in the Stockholder Representative Expense Fund (including accrued interest) shall be distributed to the Sellers in accordance with their respective Pro Rata Shares, as set forth on Exhibit A hereto. The Stockholder Representative shall deliver written instructions to the Escrow Agent directing such final distribution, and the Escrow Agent shall disburse the remaining balance in accordance with such instructions. The Stockholder Representative shall use commercially reasonable efforts to cause such distribution to occur promptly following the satisfaction of the conditions described in this Section 4.4.
Section 4.5 — Insufficient Funds; Additional Contributions
In the event that the Stockholder Representative Expense Fund is insufficient to cover the costs and expenses incurred or reasonably anticipated to be incurred by the Stockholder Representative in connection with his duties hereunder, the Stockholder Representative may request additional contributions from the Sellers in proportion to their respective Pro Rata Shares by delivering written notice to each Seller specifying the amount of the additional contribution requested and the purposes for which such funds are required. No Seller shall be obligated to make any additional contribution unless such Seller consents in writing to such contribution. The failure of any Seller to consent to an additional contribution shall not relieve such Seller of any other obligation under this Agreement or the Purchase Agreement. The Stockholder Representative shall not be obligated to advance his own personal funds or the funds of Crestline Ventures, LP to fund expenses in connection with his duties hereunder, and the Stockholder Representative shall not be liable for any failure to perform his duties to the extent that such failure results from the insufficiency of the Stockholder Representative Expense Fund and the failure of the Sellers to provide additional contributions.
ARTICLE 5 — INDEMNIFICATION ESCROW MATTERS
Section 5.1 — Role of Stockholder Representative in Escrow
The Stockholder Representative shall serve as the sole and exclusive representative of the Sellers in all matters relating to the Indemnification Escrow Amount (One Hundred Eighty Million Dollars ($180,000,000)) held by the Escrow Agent (Fidelis National Escrow Corp.) pursuant to the Escrow Agreement. The Stockholder Representative shall receive copies of all claim notices, disbursement requests, and other communications submitted by the Buyer or any Buyer Indemnified Party to the Escrow Agent under the Escrow Agreement, and no Seller (other than the Stockholder Representative in his representative capacity) shall have the right to communicate directly with the Escrow Agent regarding the Indemnification Escrow Amount.
Section 5.2 — Indemnification Claim Procedures
Upon receipt of an indemnification claim notice from the Buyer or any Buyer Indemnified Party under Article IX of the Purchase Agreement, the Stockholder Representative shall undertake the following actions:
(a) Review and Consultation. The Stockholder Representative shall promptly review the claim notice and consult with legal counsel (including Sellers' Counsel, Zalcourt Archer & Cole LLP) and, as appropriate, with accountants, tax advisors, or other experts, to evaluate the merits of the claim, the amount of Losses alleged, and the Sellers' potential exposure.
(b) Acceptance of Valid Claims. If the Stockholder Representative, in his reasonable judgment after consultation with counsel, determines that the claim is valid and that payment from the Indemnification Escrow is appropriate, the Stockholder Representative may authorize and deliver joint written instructions (together with the Buyer) to the Escrow Agent directing the release of funds from the Indemnification Escrow Amount in satisfaction of such claim, in whole or in part.
(c) Disputed Claims. If the Stockholder Representative disputes the claim in whole or in part, the Stockholder Representative shall deliver a written objection to the Buyer and the Escrow Agent within the time period specified in the Escrow Agreement (and, in any event, within thirty (30) days following receipt of the claim notice, unless a different period is specified in the Escrow Agreement), setting forth in reasonable detail the basis for such objection. Upon delivery of such objection, the disputed claim shall be resolved in accordance with the dispute resolution provisions set forth in the Purchase Agreement and the Escrow Agreement.
(d) Tipping Basket. In connection with the evaluation and resolution of indemnification claims, the Stockholder Representative and the Sellers acknowledge that the Indemnification Basket of Nine Million Dollars ($9,000,000) (representing one percent (1%) of the Purchase Price) is structured as a "tipping basket" and not as a true deductible. Accordingly, the Sellers shall have no obligation to indemnify the Buyer Indemnified Parties for aggregate Losses that do not exceed the Indemnification Basket. However, once the aggregate amount of indemnifiable Losses exceeds Nine Million Dollars ($9,000,000), the Sellers shall be liable for the full amount of such Losses from the first dollar, subject to the Indemnification Cap of One Hundred Eighty Million Dollars ($180,000,000).
(e) Fundamental and Tax Representations. For indemnification claims arising from breaches of Fundamental Representations or Tax Representations (each as defined in the Purchase Agreement), the applicable indemnification cap shall be the Special/Fundamental Representations Indemnification Cap of Nine Hundred Million Dollars ($900,000,000) (representing one hundred percent (100%) of the Purchase Price), and the applicable Survival Period shall extend for the full applicable statute of limitations plus sixty (60) days, as set forth in the Purchase Agreement.
Section 5.3 — Escrow Release Schedule
The Indemnification Escrow Amount shall be released in accordance with the following schedule:
(a) Eighteen-Month Release. Upon the expiration of the eighteen (18)-month Survival Period for general representations and warranties (as set forth in the Purchase Agreement), the Stockholder Representative and the Buyer shall deliver joint written instructions to the Escrow Agent directing the release to the Sellers (in accordance with their respective Pro Rata Shares) of any portion of the Indemnification Escrow Amount that is not then subject to any pending or unresolved indemnification claims.
(b) Holdback for Pending Claims. To the extent that any indemnification claims are pending and unresolved as of the expiration of the eighteen (18)-month Survival Period, the Escrow Agent shall retain in the Indemnification Escrow an amount equal to the aggregate amount claimed in all such pending claims (or such other amount as may be agreed by the Buyer and the Stockholder Representative or determined by a court of competent jurisdiction). Any amounts so retained shall be released upon the final resolution of such pending claims, with amounts not required to satisfy such claims distributed to the Sellers in accordance with their respective Pro Rata Shares.
(c) Fundamental and Tax Representation Claims. To the extent that the Survival Period for Fundamental Representations or Tax Representations extends beyond the eighteen (18)-month general survival period, the Indemnification Escrow (or such portion thereof as may be necessary to satisfy potential claims relating to Fundamental Representations or Tax Representations) shall remain in effect until the expiration of such extended Survival Period and the final resolution of all claims asserted thereunder.
Section 5.4 — Third-Party Claims
The Stockholder Representative shall have the authority, on behalf of the Sellers, to control the defense, negotiation, and settlement of any third-party claims (including governmental investigations, audits, and litigation) for which the Sellers may be obligated to indemnify the Buyer or any other Buyer Indemnified Party under Article IX of the Purchase Agreement, subject in all cases to the provisions of the Purchase Agreement regarding the defense and settlement of third-party claims, including any requirements for the Buyer's consent to settlements that include non-monetary relief or that do not include a full release of the applicable Buyer Indemnified Parties. The Stockholder Representative shall keep the Buyer reasonably informed of the status and material developments regarding any such third-party claims and shall consult with the Buyer in good faith regarding the strategy for the defense thereof.
ARTICLE 6 — DUTIES AND STANDARD OF CARE
Section 6.1 — Good Faith Standard
The Stockholder Representative shall discharge his duties and exercise his authority under this Agreement and the Purchase Agreement in good faith and in the interest of the Sellers as a group. In exercising his authority, the Stockholder Representative shall use his reasonable business judgment and shall endeavor to act in a manner that he believes to be in the best interests of the Sellers as a whole, taking into account the interests of all Sellers and not solely the interests of any individual Seller or group of Sellers. The Stockholder Representative shall not be required to take any action that the Stockholder Representative reasonably believes would be contrary to applicable law, the terms of the Purchase Agreement, the Escrow Agreement, this Agreement, or the ancillary transaction documents.
Section 6.2 — No Fiduciary Duty
Notwithstanding anything to the contrary in this Agreement, the Stockholder Representative shall not be deemed a fiduciary of any Seller or of the Sellers as a group. The relationship between the Stockholder Representative and the Sellers is solely that of agent and principal, and the Stockholder Representative's duties and obligations are limited exclusively to those expressly set forth in this Agreement and the Purchase Agreement. The Stockholder Representative shall have no duty to investigate independently the merits or legality of any action taken or omitted in his capacity as Stockholder Representative, nor shall the Stockholder Representative have any duty to monitor or supervise the performance of any party under the Purchase Agreement or the Escrow Agreement. The Sellers acknowledge that the Stockholder Representative is not a professional fiduciary and is serving without compensation (other than as a Seller entitled to his Pro Rata Share of the Purchase Price).
Section 6.3 — Reliance on Advisors
The Stockholder Representative may rely, and shall be fully protected in relying, upon the advice, opinions, reports, and information of legal counsel (including Zalcourt Archer & Cole LLP, lead partner Rebecca Whitmore, and any other counsel retained by the Stockholder Representative), accountants, tax advisors, financial advisors, and other experts and professionals engaged by the Stockholder Representative at the expense of the Stockholder Representative Expense Fund (or, if the Stockholder Representative Expense Fund is insufficient, at the expense of the Sellers in accordance with their Pro Rata Shares). Any action taken or omitted by the Stockholder Representative in reasonable reliance upon such advice, opinions, reports, or information shall be deemed to have been taken or omitted in good faith and within the scope of the Stockholder Representative's authority hereunder.
Section 6.4 — Conflicts of Interest Disclosure
The Parties and the Sellers acknowledge and agree that David Ng is the Managing Partner of Crestline Ventures, LP, which holds approximately twenty-eight and three-tenths percent (28.3%) of the fully diluted equity of the Company and is the largest single stockholder of the Company. By virtue of this substantial ownership position, the Stockholder Representative may have economic interests and incentives that differ from those of other Sellers in certain respects, including with respect to the timing and amount of escrow releases, the settlement of indemnification claims, and tax-related matters. Each Seller, by approving the appointment of the Stockholder Representative (either directly or through the execution of the Purchase Agreement), acknowledges this potential conflict of interest and consents to the appointment of David Ng notwithstanding such conflict. The Stockholder Representative agrees to exercise his authority hereunder in good faith and in the interest of the Sellers as a group, as provided in Section 6.1, notwithstanding the foregoing disclosure.
ARTICLE 7 — INDEMNIFICATION AND EXCULPATION OF STOCKHOLDER REPRESENTATIVE
Section 7.1 — Exculpation
The Stockholder Representative shall not be liable to any Seller, any Buyer Indemnified Party, or any other Person for any action taken or omitted in good faith in his capacity as Stockholder Representative under this Agreement or the Purchase Agreement, or for any error of judgment, mistake of fact, or mistake of law, in the performance or non-performance of his duties hereunder. The foregoing limitation of liability shall apply regardless of whether the Stockholder Representative was negligent or otherwise at fault, provided, however, that nothing in this Section 7.1 shall relieve the Stockholder Representative from liability arising from his own willful misconduct, gross negligence, or fraud.
Section 7.2 — Indemnification of Stockholder Representative
Each Seller, severally (and not jointly) in accordance with such Seller's Pro Rata Share, hereby agrees to indemnify, defend, and hold harmless the Stockholder Representative from and against any and all losses, claims, damages, liabilities, penalties, judgments, settlements, costs, and expenses (including reasonable attorneys' fees and disbursements) (collectively, "Representative Losses") arising out of or relating to the performance or non-performance by the Stockholder Representative of his duties and obligations under this Agreement and the Purchase Agreement, including any Representative Losses arising from any action taken or omitted by the Stockholder Representative in good faith and in accordance with the terms of this Agreement; provided, however, that no Seller shall be obligated to indemnify the Stockholder Representative for any Representative Losses arising from the Stockholder Representative's willful misconduct, gross negligence, or fraud.
The Stockholder Representative shall be entitled to satisfy any indemnification claims against the Sellers under this Section 7.2 first from the Stockholder Representative Expense Fund (to the extent funds remain available therein) before seeking payment directly from the Sellers. Any amounts paid from the Stockholder Representative Expense Fund in satisfaction of such claims shall reduce the balance of the Stockholder Representative Expense Fund available for distribution to the Sellers upon termination.
Section 7.3 — No Personal Liability
The Stockholder Representative shall have no personal liability to the Buyer, the Company, or any Seller or other Person by reason of his service as Stockholder Representative hereunder, except in the case of willful misconduct, gross negligence, or fraud. The Stockholder Representative's obligations hereunder are solely in his representative capacity, and no recourse shall be had against the Stockholder Representative's personal assets (or the assets of Crestline Ventures, LP, except to the extent of Crestline Ventures, LP's obligations as a Seller under the Purchase Agreement) for any obligation or liability arising under this Agreement.
ARTICLE 8 — RESIGNATION AND REMOVAL; SUCCESSOR REPRESENTATIVE
Section 8.1 — Resignation
The Stockholder Representative may resign from his position as Stockholder Representative at any time by giving at least thirty (30) days' prior written notice to the Buyer and to each of the Sellers at such Seller's address as set forth in the Purchase Agreement or as otherwise provided to the Stockholder Representative. Any such resignation shall not become effective until a successor Stockholder Representative has been duly appointed in accordance with Section 8.3 and has accepted such appointment. Until such time as a successor Stockholder Representative has been appointed and has accepted such appointment, the resigning Stockholder Representative shall continue to serve and shall continue to have all of the rights, powers, and obligations set forth herein.
Section 8.2 — Removal
The Stockholder Representative may be removed from his position as Stockholder Representative at any time, with or without cause, by the written consent of Sellers holding a majority-in-interest (measured by Pro Rata Share) of the Sellers. Any such removal shall not become effective until a successor Stockholder Representative has been duly appointed in accordance with Section 8.3 and has accepted such appointment. Notice of removal shall be delivered to the Stockholder Representative, the Buyer, and the Escrow Agent (Fidelis National Escrow Corp.).
Section 8.3 — Appointment of Successor
In the event of the resignation or removal of the Stockholder Representative, a successor Stockholder Representative shall be appointed by the written consent of Sellers holding a majority-in-interest (measured by Pro Rata Share) of the Sellers. The appointment of a successor Stockholder Representative shall be effective upon the written acceptance of such appointment by the successor. If no successor Stockholder Representative has been appointed and has accepted such appointment within thirty (30) days following the date on which the resigning or removed Stockholder Representative gives notice of resignation or the Sellers give notice of removal (as applicable), then any Seller may petition the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines jurisdiction, the Superior Court of the State of Delaware) for the appointment of a successor Stockholder Representative. Prompt written notice of the appointment of any successor Stockholder Representative shall be delivered to the Buyer and to the Escrow Agent.
Section 8.4 — Rights and Obligations of Successor
Upon the effective appointment and acceptance of a successor Stockholder Representative, the successor Stockholder Representative shall succeed to all of the rights, powers, duties, and obligations of the predecessor Stockholder Representative under this Agreement, the Purchase Agreement, and the Escrow Agreement, as if the successor had been originally named as the Stockholder Representative hereunder. The predecessor Stockholder Representative shall be discharged from all further duties and obligations under this Agreement (other than obligations arising under Article 7 hereof with respect to acts or omissions occurring prior to such discharge), and shall promptly deliver to the successor Stockholder Representative all documents, records, files, and other materials in the predecessor's possession relating to the Stockholder Representative's duties hereunder.
ARTICLE 9 — COMMUNICATIONS AND NOTICES
Section 9.1 — Notices to the Stockholder Representative
All notices, requests, demands, claims, consents, and other communications to the Stockholder Representative shall be delivered to:
David Ng, Managing Partner Crestline Ventures, LP 400 Beacon Street, Suite 1200 Boston, Massachusetts 02108 Telephone: (617) 555-4820
Email: dng@crestlineventures.com
with a copy (which shall not constitute notice) to:
Zalcourt Archer & Cole LLP One Federal Street, 30th Floor Boston, Massachusetts 02110
Attention: Rebecca Whitmore
Telephone: (617) 555-9100
Email: rwhitmore@lathamarchercole.com
Section 9.2 — Notices to the Buyer
All notices, requests, demands, claims, consents, and other communications to the Buyer shall be delivered to:
Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, New Jersey 08540
Attention: Thomas F. Holbrook, General Counsel & Secretary
Telephone: (609) 555-7300
Email: tholbrook@penterrapharma.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 200 Park Avenue, 42nd Floor New York, New York 10166
Attention: Oliver Mackenzie
Telephone: (212) 555-6000
Email: omackenzie@calderwoodharkness.com
Section 9.3 — Notices to the Company
All notices, requests, demands, claims, consents, and other communications to the Company (prior to Closing) shall be delivered to:
Veridian Biosciences, Inc. 550 Gateway Drive Cambridge, Massachusetts 02142
Attention: Rachel Stein-Goldberg, General Counsel
Telephone: (617) 555-2200
Email: rstein-goldberg@veridianbiosciences.com
Following Closing, notices to the Company shall be delivered to the Buyer at the address set forth in Section 9.2 above.
Section 9.4 — Notice Mechanics
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made as follows:
(a) If delivered by hand or by nationally recognized overnight courier service (such as Sundial Data Systems or Halcyon Partners LLC), upon actual receipt by the addressee (or upon refusal of receipt);
(b) If sent by certified or registered mail, return receipt requested, postage prepaid, upon the earlier of actual receipt or three (3) Business Days after being deposited in the United States mail; and
(c) If sent by electronic mail, upon the sender's receipt of an acknowledgment from the intended recipient (such as a "read receipt" or a reply message), provided that notice by electronic mail shall be permitted for routine communications but shall not constitute effective notice for purposes of this Agreement unless and until confirmed by delivery through one of the methods specified in clauses (a) or (b) above.
Any Party may change its address for the purpose of receiving notices under this Agreement by giving written notice of such change to the other Parties in accordance with this Section 9.4.
ARTICLE 10 — INFORMATION RIGHTS
Section 10.1 — Right to Information from Sellers
Each Seller shall provide the Stockholder Representative with such information, documents, records, and other materials as the Stockholder Representative may reasonably request from time to time in connection with the performance of his duties under this Agreement and the Purchase Agreement, including information regarding such Seller's equity holdings, tax matters, and any other matters relevant to the Stockholder Representative's evaluation of indemnification claims, escrow matters, or other post-Closing obligations. Each Seller shall cooperate fully with the Stockholder Representative in connection with any reasonable request for information hereunder.
Section 10.2 — Reporting to Sellers
The Stockholder Representative shall provide periodic written updates to the Sellers, no less frequently than quarterly (and more frequently if circumstances warrant), regarding the following matters:
(a) The status of any pending or threatened indemnification claims under Article IX of the Purchase Agreement, including a summary of the claims asserted, the amounts claimed, and the Stockholder Representative's assessment of the merits of such claims;
(b) The current balance of the Indemnification Escrow Amount held by the Escrow Agent, including any disbursements therefrom;
(c) The current balance of the Stockholder Representative Expense Fund, including an itemization of all disbursements therefrom;
(d) Any material developments under the Purchase Agreement, the Escrow Agreement, or the ancillary transaction documents; and
(e) Any other matters that the Stockholder Representative deems relevant to the interests of the Sellers.
In addition to the foregoing periodic updates, the Stockholder Representative shall promptly notify the Sellers of any material indemnification claim, notice, demand, or other communication received from the Buyer, the Escrow Agent, or any third party that is reasonably likely to result in liability to the Sellers.
Section 10.3 — Right to Information from Buyer
The Stockholder Representative shall have the right to receive from the Buyer such information, documents, and access as is provided for in the Purchase Agreement with respect to post-Closing information sharing between the Buyer and the Stockholder Representative, including access to the books and records of the Company following the Closing. The Buyer acknowledges and agrees that it shall comply with its information-sharing obligations under the Purchase Agreement with respect to the Stockholder Representative.
ARTICLE 11 — TERM AND SURVIVAL
Section 11.1 — Effective Date
This Agreement shall become effective upon execution and delivery by all Parties hereto on June 10, 2024.
Section 11.2 — Termination
This Agreement shall terminate upon the latest to occur of the following:
(a) The final release or distribution of all amounts held in the Indemnification Escrow (including the full One Hundred Eighty Million Dollars ($180,000,000) or such remaining balance as may exist at the time) in accordance with the Escrow Agreement;
(b) The final release or distribution of all amounts held in the Stockholder Representative Expense Fund (including any remaining balance and accrued interest) in accordance with this Agreement and the Escrow Agreement;
(c) The final resolution (including by settlement, final non-appealable judgment, or expiration of the applicable Survival Period without a pending claim) of all pending or threatened indemnification claims under Article IX of the Purchase Agreement; and
(d) Notwithstanding the foregoing, in the event that the Purchase Agreement is terminated prior to Closing in accordance with Section 8.1 thereof, this Agreement shall terminate automatically upon such termination of the Purchase Agreement and shall thereupon be of no further force or effect; provided, however, that the provisions of Article 7 (Indemnification and Exculpation of Stockholder Representative), Article 12 (General Provisions), and this Section 11.2 shall survive such termination and shall continue in full force and effect.
Section 11.3 — Survival of Certain Provisions
The provisions of Article 7 (Indemnification and Exculpation of Stockholder Representative), Article 12 (General Provisions), and Section 11.2 of this Agreement shall survive the termination of this Agreement and shall continue in full force and effect indefinitely (or, in the case of the indemnification obligations under Section 7.2, until the expiration of the applicable statute of limitations with respect to such obligations).
ARTICLE 12 — GENERAL PROVISIONS
Section 12.1 — Governing Law
This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.