CONFIDENTIAL — ATTORNEY WORK PRODUCT SUBJECT TO FURTHER NEGOTIATION AND REVISION
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 42nd Floor New York, NY 10166
Matter No.: 1018-00008
DRAFT — June 5, 2024
TRANSITION SERVICES AGREEMENT
by and between
PENTERRA PHARMACEUTICALS CORP.
and
VERIDIAN BIOSCIENCES, INC.
Dated as of [●], 2024
This Transition Services Agreement will be entered into at Closing and is attached hereto as an exhibit to the Stock Purchase Agreement dated [●], 2024. This draft, dated June 5, 2024, is prepared for discussion purposes and remains subject to further negotiation and revision. Nothing in this draft constitutes a binding obligation on any party.
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TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into as of [●], 2024 (the "Effective Date"), by and between:
PENTERRA PHARMACEUTICALS CORP., a Delaware corporation, with its principal offices at 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540 (the "Buyer" or the "Service Recipient");
and
VERIDIAN BIOSCIENCES, INC., a Delaware corporation, with its principal offices at 550 Gateway Drive, Cambridge, MA 02142 (the "Seller" or the "Service Provider").
Each of the Service Recipient and the Service Provider is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Buyer, the Seller, the Sellers identified therein, and David Ng, in his capacity as Stockholder Representative, have entered into that certain Stock Purchase Agreement, dated as of June 10, 2024 (as amended, supplemented, or otherwise modified from time to time, the "Purchase Agreement" or the "SPA"), pursuant to which the Buyer is acquiring one hundred percent (100%) of the outstanding capital stock of Veridian Biosciences, Inc. for an aggregate purchase price of Nine Hundred Million Dollars ($900,000,000) in cash, subject to the adjustments and terms set forth therein;
WHEREAS, the Seller has been operating as a privately held, clinical-stage biotechnology company focused on the discovery and development of immuno-oncology therapeutics, employing approximately one hundred forty-eight (148) employees as of the date of the Purchase Agreement, with its principal offices and laboratory facilities located at 550 Gateway Drive, Cambridge, MA 02142;
WHEREAS, following the consummation of the transactions contemplated by the Purchase Agreement (the "Closing"), the Seller will become a wholly owned subsidiary of the Buyer, and the Buyer desires the continued provision of certain services currently performed by the Seller's personnel to facilitate the orderly integration of the Seller's business, operations, and assets into the Buyer's broader organizational structure;
WHEREAS, the Service Provider is willing to provide, and to cause certain of its employees and consultants to provide, such transitional services to the Service Recipient on the terms and conditions set forth herein, in order to ensure business continuity and the uninterrupted conduct of the Seller's clinical programs, regulatory activities, and day-to-day operations during the transition period; and
WHEREAS, this Agreement is contemplated by, and entered into in connection with, the Purchase Agreement and the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth 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 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Transition Services Agreement, including all Schedules and Exhibits attached hereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Buyer" or "Service Recipient" means Penterra Pharmaceuticals Corp., a Delaware corporation, together with its successors and permitted assigns.
"Closing" has the meaning ascribed to such term in Section 2.3 of the Purchase Agreement.
"Closing Date" means the date on which the Closing occurs in accordance with the terms and conditions of the Purchase Agreement.
"Confidential Information" means any and all non-public, confidential, or proprietary information disclosed by either Party to the other Party (or to such other Party's representatives) in connection with the negotiation, execution, or performance of this Agreement or the Services, including trade secrets, business strategies, financial data, technical data, clinical trial data, patient data, regulatory correspondence, intellectual property, and any other information that, by its nature or the circumstances of its disclosure, should reasonably be treated as confidential. The term "Confidential Information" shall be subject to, and the obligations hereunder shall be supplementary to, the confidentiality provisions of the Purchase Agreement and the Confidentiality Agreement, dated as of March 4, 2024, by and between Penterra Pharmaceuticals Corp. and Veridian Biosciences, Inc. (the "Confidentiality Agreement").
"Force Majeure Event" means any event or circumstance beyond the reasonable control of the affected Party, including acts of God, natural disasters (including earthquakes, floods, hurricanes, and severe weather events), epidemics, pandemics, acts of war (whether or not declared), terrorism, civil unrest, sabotage, embargoes, sanctions, governmental actions or regulations, labor strikes or lockouts (not involving the affected Party's employees), fire, explosion, power failure, telecommunications failure, cyberattacks, or any other similar event or circumstance, in each case, that could not have been reasonably foreseen or prevented by the affected Party through the exercise of commercially reasonable efforts.
"Migration Plan" means the written plan or plans for transitioning each Service (or category of Services) from the Service Provider to the Service Recipient's own systems, personnel, and internal capabilities, to be jointly developed by the Service Managers within thirty (30) days after the Closing Date in accordance with Section 5.3.
"Purchase Agreement" means the Stock Purchase Agreement, dated as of June 10, 2024, by and among Penterra Pharmaceuticals Corp., Veridian Biosciences, Inc., the Sellers identified therein, and David Ng, as Stockholder Representative, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Seller" or "Service Provider" means Veridian Biosciences, Inc., a Delaware corporation (which, following the Closing, will be a wholly owned subsidiary of the Buyer), together with its successors and permitted assigns.
"Service Charges" means the fees payable by the Service Recipient to the Service Provider for the provision of the Services, as calculated in accordance with Section 3.1 and as set forth in Schedule A.
"Service Commencement Date" means the Closing Date.
"Service Manager" means the designated representative of each Party responsible for the day-to-day coordination and management of the Services, as designated pursuant to Section 5.1.
"Service Period" means, with respect to each Service or category of Services, the period commencing on the Service Commencement Date and ending on the earliest of (a) twelve (12) months after the Closing Date (the "Maximum Service Period"), (b) the effective date of termination of such Service in accordance with Article IV, or (c) such earlier date as the Parties may mutually agree in writing.
"Services" means the transitional services described in Schedule A attached hereto, as such Schedule A may be amended from time to time in accordance with the terms of this Agreement, including any Additional Services agreed to by the Parties pursuant to Section 2.5.
"Third-Party Costs" means actual, documented, out-of-pocket costs and expenses paid or payable by the Service Provider to unaffiliated third parties in connection with the provision of the Services, including fees paid to third-party vendors, contractors, and service providers.
"Transition Completion Date" means the date on which all Services under this Agreement have been terminated or have expired in accordance with the terms hereof and all wind-down obligations have been satisfied.
"Transition Steering Committee" or "TSC" means the committee established pursuant to Section 5.2 to oversee and coordinate the transition of Services.
Section 1.2 — Interpretation and Cross-References
(a) Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Purchase Agreement. Without limiting the generality of the foregoing, the terms "Material Adverse Effect," "Knowledge," "Person," "Affiliate," "Business Day," "Governmental Authority," "Law," "Lien," "Order," "Permit," "Tax," and "Transaction Documents," as used herein, shall have the meanings set forth in Section 1.1 of the Purchase Agreement.
(b) Unless the context otherwise requires: (i) words importing the singular include the plural and vice versa; (ii) words importing a gender include each gender; (iii) references to any agreement, instrument, or other document mean such agreement, instrument, or other document as amended, supplemented, or otherwise modified from time to time; (iv) references to any statute or regulation mean such statute or regulation as amended, re-enacted, consolidated, or replaced from time to time, and include all regulations, rules, and subordinate legislation made under or pursuant to such statute or regulation; (v) the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation"; (vi) 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; and (vii) references to "days" mean calendar days unless otherwise specified.
(c) The headings and captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement, and shall not be referred to in connection with the construction or interpretation of this Agreement.
(d) All references herein to Articles, Sections, Schedules, and Exhibits are to Articles, Sections, Schedules, and Exhibits of or to this Agreement, unless otherwise indicated.
ARTICLE II — SERVICES
Section 2.1 — Scope of Services
(a) Commencing on the Service Commencement Date and continuing during the applicable Service Period, the Service Provider shall provide, or shall cause its employees, consultants, and authorized agents to provide, the transitional services described in Schedule A (the "Services") to the Service Recipient. The Services are organized into the following five (5) categories:
(i) Clinical Operations Services — as described in Category 1 of Schedule A;
(ii) Regulatory Affairs Services — as described in Category 2 of Schedule A;
(iii) Information Technology and Systems Support Services — as described in Category 3 of Schedule A;
(iv) Finance and Accounting Services — as described in Category 4 of Schedule A; and
(v) General and Administrative Services — as described in Category 5 of Schedule A.
(b) The Services shall be provided in a manner, and at a level of quality and timeliness, that is consistent with how such services (or substantially similar services) were provided by the Seller in the ordinary course of its business during the twelve (12)-month period immediately prior to the Closing Date, taking into account the resources and personnel that were allocated by the Seller to such services during such period.
(c) Unless otherwise specified in Schedule A or as otherwise agreed by the Parties in writing, the Services shall be provided from the Seller's principal offices and laboratory facilities located at 550 Gateway Drive, Cambridge, MA 02142, or remotely (including by means of teleconference, videoconference, email, or other electronic means), as appropriate and consistent with past practice. The Service Provider shall not relocate the primary location from which any material portion of the Services is provided without the prior written consent of the Service Recipient, which consent shall not be unreasonably withheld, conditioned, or delayed.
(d) For the avoidance of doubt, the obligation of the Service Provider to provide the Services is subject to, and conditioned upon, the occurrence of the Closing in accordance with the terms and conditions of the Purchase Agreement.
Section 2.2 — Standard of Performance
(a) The Service Provider shall perform, and shall cause its personnel to perform, the Services in a professional and workmanlike manner, exercising the same degree of care, skill, diligence, and competence as the Service Provider exercised in performing similar services for its own operations and business during the twelve (12)-month period immediately prior to the Closing Date, and in no event less than the standard of care customarily exercised by reasonably prudent professionals in the biotechnology and pharmaceutical industry performing substantially similar services.
(b) The Service Provider shall allocate sufficient qualified personnel, with appropriate experience and expertise, to perform the Services in accordance with the terms and conditions of this Agreement and in a timely manner. The Service Provider shall ensure that all personnel performing the Services are properly trained, supervised, and have the requisite knowledge and skills to perform the tasks assigned to them.
(c) Notwithstanding anything to the contrary in this Agreement, the Service Provider shall have no obligation to provide any Services that are materially greater in scope, nature, volume, frequency, or duration than those services provided by the Seller to, or on behalf of, its own business during the twelve (12)-month period immediately preceding the Closing Date. In the event that the Service Recipient requests Services that the Service Provider reasonably determines to exceed such scope, nature, volume, frequency, or duration, the Parties shall negotiate in good faith to agree upon appropriate modifications to the scope of Services and the applicable Service Charges.
(d) The Service Provider shall comply with all applicable Laws in the performance of the Services, including all applicable federal and state regulations pertaining to the conduct of clinical trials, data privacy and protection, employment, health and safety, and export control.
Section 2.3 — Excluded Services
Notwithstanding anything to the contrary in this Agreement or in Schedule A, the Services expressly do not include, and the Service Provider shall have no obligation to provide, any of the following:
(a) any legal services, legal advice, legal representation, or legal opinions of any kind, whether relating to the transactions contemplated by the Purchase Agreement, the business of the Seller, regulatory matters, or otherwise;
(b) any services that would require the Service Provider or any of its personnel to violate any applicable Law, rule, regulation, order, judgment, or decree of any Governmental Authority;
(c) any services that require governmental licenses, permits, authorizations, or certifications that the Service Provider does not hold or is not qualified to hold as of the date such services are to be performed;
(d) any investment advisory services, financial advisory services, broker-dealer services, or any other services that would require registration or licensing under applicable securities laws, the Investment Advisers Act of 1940, or similar regulatory frameworks;
(e) the acquisition, procurement, or financing of any capital equipment, capital expenditures, or new fixed assets on behalf of the Service Recipient, it being understood that the Service Provider's obligations are limited to maintaining and supporting existing assets and infrastructure as described in Schedule A; and
(f) any services that the Service Provider reasonably determines would create a conflict of interest with the Service Provider's obligations under the Purchase Agreement or any other Transaction Document.
Section 2.4 — Service Provider Personnel
(a) The key personnel anticipated to provide the Services under this Agreement, and their respective areas of responsibility, are as follows:
(i) Dr. Julian Marek, Chief Executive Officer and Co-Founder of Veridian Biosciences, Inc. — Dr. Marek shall provide strategic oversight, clinical development leadership, and management transition support, including knowledge transfer regarding the Seller's business strategy, pipeline prioritization, and key stakeholder relationships. Dr. Marek's provision of Services hereunder shall be subject to, and consistent with, the terms of his employment agreement and non-competition agreement entered into in connection with the Closing.
(ii) Dr. Priya Chandrasekaran, Chief Scientific Officer and Co-Founder of Veridian Biosciences, Inc. — Dr. Chandrasekaran shall provide scientific and research operations oversight, including comprehensive knowledge transfer regarding the VeriTCE (Veridian T-Cell Engager) platform technology, preclinical programs, research collaborations, and the scientific rationale and mechanisms of action underlying the Seller's pipeline candidates.
(iii) Steven R. Kessler, Chief Financial Officer of Veridian Biosciences, Inc. — Mr. Kessler shall provide financial reporting, accounting transition, and historical financial records support, including coordination with external auditors, tax advisors, and the preparation of financial information necessary for the Service Recipient's consolidated reporting obligations.
(iv) Dr. Anne-Marie Fontaine, Vice President of Regulatory Affairs of Veridian Biosciences, Inc. — Dr. Fontaine shall provide regulatory affairs support, including management of all FDA interactions related to IND 154832 for VRD-4187, clinical hold correspondence, regulatory submissions, IND amendments, and preparation for potential End-of-Phase II meetings with the FDA and any foreign regulatory authorities.
(b) The Service Provider shall not remove, reassign, or materially reduce the time commitment of any key personnel identified in Section 2.4(a) without the prior written consent of the Service Recipient, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that the foregoing shall not restrict the right of any such individual to voluntarily terminate his or her employment with the Service Provider (or any successor thereto), and the Service Provider shall not be in breach of this Agreement solely by reason of any such voluntary termination. In the event that any key personnel identified above becomes unavailable (whether by voluntary termination, disability, death, or otherwise), the Service Provider shall promptly notify the Service Recipient and shall use commercially reasonable efforts to designate a qualified replacement, subject to the Service Recipient's reasonable approval.
(c) All employees of the Seller or the Service Provider who perform Services under this Agreement shall remain employees of Veridian Biosciences, Inc. (which, following the Closing, will be a wholly owned subsidiary of Penterra Pharmaceuticals Corp.) and shall not be deemed to be employees, agents, or representatives of the Service Recipient (in its capacity as the parent corporation) for any purpose, including for purposes of employee benefits, workers' compensation, unemployment insurance, or payroll taxes, except as may otherwise be provided in the Purchase Agreement or any ancillary employment agreement entered into in connection with the transactions contemplated thereby.
(d) The Service Provider shall be solely responsible for the compensation, benefits, and employment-related obligations with respect to all Service Provider personnel performing the Services, including the payment of wages, salaries, bonuses, and benefits, the withholding and remittance of all applicable Taxes, and compliance with all applicable employment Laws.
Section 2.5 — Additional Services
(a) From time to time during the Service Period, the Service Recipient may request that the Service Provider provide transitional services that are not described in Schedule A ("Additional Services") by delivering a written request to the Service Provider's Service Manager that describes in reasonable detail the nature, scope, and estimated duration of the requested Additional Services.
(b) The Service Provider shall consider any such request in good faith and shall notify the Service Recipient within ten (10) Business Days of receipt of such request whether the Service Provider is willing and able to provide the requested Additional Services and, if so, the proposed terms, including applicable fees and duration. The Service Provider shall have no obligation to agree to provide any Additional Services, and the Service Provider's decision to decline any such request shall not constitute a breach of this Agreement.
(c) If the Parties agree upon the terms of any Additional Services, the Parties shall execute a written amendment to Schedule A that sets forth the description of the Additional Services, the applicable Service Charges (calculated in accordance with the pricing methodology set forth in Section 3.1, unless otherwise agreed), the applicable duration, and any other relevant terms and conditions. Once so agreed and documented, such Additional Services shall constitute "Services" for all purposes of this Agreement and shall be subject to all terms and conditions hereof.
Section 2.6 — Access and Cooperation
(a) The Service Recipient shall provide the Service Provider with reasonable access to such information, data, systems, facilities, and personnel of the Service Recipient as may be reasonably necessary for the Service Provider to perform the Services in accordance with this Agreement. The Service Recipient shall respond promptly to reasonable requests from the Service Provider for information, decisions, approvals, and directions related to the performance of the Services.
(b) The Service Recipient shall cooperate in good faith with the Service Provider to facilitate the orderly performance and transition of the Services. Without limiting the foregoing, the Service Recipient shall (i) designate appropriate personnel to work with the Service Provider on the development and implementation of the Migration Plan, (ii) provide timely feedback on Service deliverables and reports, and (iii) promptly notify the Service Provider of any changes in the Service Recipient's requirements, systems, or organizational structure that may affect the provision of the Services.
(c) The Service Provider shall grant the Service Recipient and its authorized representatives reasonable access to the Service Provider's offices, laboratory facilities, and other premises at 550 Gateway Drive, Cambridge, MA 02142, during regular business hours and upon reasonable advance notice, for purposes related to the receipt of the Services, the monitoring of Service performance, and the execution of the Migration Plan. Such access shall be subject to the Service Provider's reasonable security, health, and safety requirements and applicable facility access protocols.
(d) Each Party shall bear its own internal costs associated with performing its cooperation and access obligations under this Section 2.6, unless otherwise agreed in writing.
ARTICLE III — SERVICE CHARGES AND PAYMENT
Section 3.1 — Service Charges
(a) In consideration of the provision of the Services, the Service Recipient shall pay to the Service Provider the Service Charges applicable to each category of Services, as calculated in accordance with this Section 3.1 and as set forth in Schedule A.
(b) Service Charges for each category of Services shall be calculated on a cost-plus basis, consisting of the following components:
(i) Direct Personnel Costs. The actual direct costs of personnel engaged in performing the applicable Services, calculated based on the fully loaded cost of each such individual (including base salary, benefits, payroll taxes, bonuses (if applicable and pro-rated), and allocated overhead), prorated based on the percentage of each such individual's time devoted to the performance of the Services during the applicable billing period. The fully loaded cost rates for key personnel shall be documented in Schedule A or, if not available as of the Effective Date, shall be determined by the Service Managers within fifteen (15) days after the Closing Date and appended to Schedule A.
(ii) Administrative Markup. A five percent (5%) administrative markup applied to the Direct Personnel Costs described in clause (i) above, which markup is intended to compensate the Service Provider for the general administrative burden associated with providing the Services, including management oversight, coordination, and internal administrative support.
(iii) Third-Party Costs. All Third-Party Costs incurred by the Service Provider in connection with the provision of the Services shall be passed through to the Service Recipient at actual cost, without any markup. The Service Provider shall not incur any individual Third-Party Cost in excess of Twenty-Five Thousand Dollars ($25,000) without the prior written approval of the Service Recipient (which approval shall not be unreasonably withheld or delayed), except for recurring Third-Party Costs that were incurred in the ordinary course of the Seller's business prior to the Closing Date.
(c) Estimated monthly Service Charges for each category of Services are set forth in Schedule A for budgeting and planning purposes. Such estimates are non-binding and are subject to adjustment based on actual costs incurred. The Service Provider shall promptly notify the Service Recipient if actual monthly Service Charges are expected to exceed the estimated monthly charges for any Service category by more than fifteen percent (15%).
Section 3.2 — Invoicing
(a) The Service Provider shall prepare and deliver to the Service Recipient a detailed monthly invoice for the Services performed during the preceding calendar month. Each such invoice shall be delivered within fifteen (15) days after the end of the applicable calendar month.
(b) Each invoice shall include the following information in reasonable detail:
(i) The applicable Service category or categories;
(ii) A description of the Services performed during the billing period;
(iii) The names and titles of personnel who performed Services during the billing period, together with the hours expended by each such individual, broken down by Service category;
(iv) The applicable fully loaded cost rate for each individual;
(v) The calculation of the five percent (5%) administrative markup;
(vi) An itemization of all Third-Party Costs incurred during the billing period, with supporting documentation (including copies of third-party invoices or receipts) for any individual Third-Party Cost in excess of Five Thousand Dollars ($5,000);
(vii) The total Service Charges for the billing period; and
(viii) A comparison of actual charges against estimated monthly charges set forth in Schedule A.
(c) All invoices shall be in a form substantially similar to the Form of Monthly Service Invoice attached hereto as Exhibit A, or such other form as the Service Managers may mutually agree.
(d) Invoices shall be directed to:
Penterra Pharmaceuticals Corp.
Attention: Catherine M. Burgess, Chief Financial Officer
1100 Meridian Boulevard, Suite 400 Princeton, NJ 08540
Email: cburgess@penterrapharma.com
With a copy to:
Thomas F. Holbrook, General Counsel Penterra Pharmaceuticals Corp. 1100 Meridian Boulevard, Suite 400 Princeton, NJ 08540
Email: tholbrook@penterrapharma.com
Section 3.3 — Payment Terms
(a) The Service Recipient shall pay all undisputed invoiced amounts within thirty (30) days following the Service Recipient's receipt of the applicable invoice. All payments shall be made by wire transfer of immediately available funds to a bank account designated by the Service Provider in writing.
(b) Any undisputed amounts not paid by the Service Recipient within the applicable thirty (30)-day payment period shall bear interest from the date such payment was due until the date such payment is received at a rate equal to the lesser of (i) one percent (1.0%) per month (compounded monthly) or (ii) the maximum rate permitted by applicable Law.
(c) The Service Recipient shall have the right to dispute, in good faith, any invoiced amount or any portion thereof. To exercise such right, the Service Recipient shall deliver written notice to the Service Provider (with reasonable specificity as to the basis of the dispute) within fifteen (15) days after receipt of the applicable invoice. The Service Recipient shall pay all undisputed amounts in accordance with Section 3.3(a), notwithstanding any dispute with respect to a portion of the invoiced amount. Disputed amounts shall be subject to the dispute resolution procedures set forth in Article VIII. If any disputed amount (or portion thereof) is subsequently determined to have been properly invoiced, the Service Recipient shall pay such amount, together with interest thereon calculated in accordance with Section 3.3(b), within ten (10) days following the resolution of such dispute.
(d) The Service Provider shall maintain complete and accurate books and records relating to the calculation of Service Charges, including time records, personnel cost data, and Third-Party Cost documentation. Such books and records shall be retained for a period of at least three (3) years following the Transition Completion Date and shall be made available to the Service Recipient and its authorized representatives (including its auditors) for inspection and audit upon reasonable advance notice during normal business hours.
Section 3.4 — Taxes
(a) All Service Charges set forth in this Agreement and in Schedule A are exclusive of any applicable sales taxes, use taxes, value-added taxes, goods and services taxes, or other similar transactional taxes imposed by any federal, state, local, or foreign taxing authority in connection with the provision of the Services (collectively, "Transaction Taxes").
(b) The Service Recipient shall be responsible for and shall pay (or reimburse the Service Provider for) all Transaction Taxes imposed in connection with the provision of the Services, other than any income taxes, franchise taxes, or similar taxes imposed on the Service Provider's net income or gross receipts. The Service Provider shall separately state the amount of any Transaction Taxes on each invoice.
(c) The allocation of taxes between the Parties under this Section 3.4 shall be consistent with the tax allocation principles set forth in the Purchase Agreement, including Section 6.4 thereof. Each Party shall cooperate in good faith with the other Party to minimize the Transaction Taxes payable in connection with the Services to the extent permissible under applicable Law.
(d) Each Party shall be responsible for its own income taxes arising from or in connection with its performance under this Agreement.
ARTICLE IV — TERM AND TERMINATION
Section 4.1 — Term
This Agreement shall become effective as of the Closing Date and shall remain in full force and effect until the earliest to occur of (a) twelve (12) months after the Closing Date (the "Maximum Service Period"), (b) the termination of all Services pursuant to this Article IV, or (c) the date on which the Parties mutually agree in writing to terminate this Agreement. For the avoidance of doubt, this Agreement shall have no force or effect prior to the Closing, and the respective rights and obligations of the Parties hereunder are conditioned upon, and shall not arise until, the occurrence of the Closing.
Section 4.2 — Termination of Individual Services
(a) The Service Recipient may terminate any individual Service, or any category of Services described in Schedule A, at any time during the Service Period by delivering not less than thirty (30) days' prior written notice to the Service Provider specifying the Service or Service category to be terminated and the requested effective termination date. Such written notice shall be in a form substantially similar to the Form of Service Termination Notice attached hereto as Exhibit B.
(b) Upon the effective date of termination of any individual Service or Service category, the corresponding Service Charges shall cease to accrue with respect to such Service or Service category; provided, however, that the Service Recipient shall remain responsible for (i) the payment of all Service Charges accrued through and including the effective date of termination, (ii) any reasonable and documented wind-down costs incurred by the Service Provider in connection with the orderly cessation of such Service (including any non-cancellable commitments to third-party vendors entered into prior to receipt of the termination notice), and (iii) any Third-Party Costs incurred prior to the effective date of termination.
(c) Once a Service or Service category has been terminated pursuant to this Section 4.2, the Service Recipient may not reinstate such Service or Service category without the prior written consent of the Service Provider, which consent may be granted or withheld in the Service Provider's sole discretion. If the Service Provider agrees to reinstate a terminated Service, the terms of such reinstatement (including applicable Service Charges and duration) shall be documented in a written amendment to Schedule A.
Section 4.3 — Termination for Cause
(a) Either Party may terminate this Agreement in its entirety, or with respect to any particular Service or Service category, upon written notice to the other Party if:
(i) the other Party materially breaches any provision of this Agreement and such breach remains uncured for a period of thirty (30) days following the delivery of written notice by the non-breaching Party to the breaching Party specifying in reasonable detail the nature of such breach; or
(ii) the other Party (A) becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership, liquidation, or composition or assignment for the benefit of creditors, (B) makes a general assignment for the benefit of its creditors, (C) has a receiver, trustee, custodian, or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business, or (D) is generally unable to pay its debts as they become due.
(b) In addition to the foregoing, the Service Provider may terminate this Agreement in its entirety upon thirty (30) days' prior written notice to the Service Recipient if the Service Recipient fails to pay any undisputed amounts due and owing under this Agreement within sixty (60) days after the applicable due date as determined in accordance with Section 3.3(a).
(c) Termination of this Agreement pursuant to this Section 4.3 shall be without prejudice to any other rights or remedies that may be available to the terminating Party at law, in equity, or under the Purchase Agreement.
Section 4.4 — Termination upon Purchase Agreement Termination
In the event that the Purchase Agreement is terminated prior to the Closing in accordance with its terms (including pursuant to Section 8.1 of the Purchase Agreement, including by reason of the passage of the Outside Date of December 10, 2024, or otherwise), this Agreement shall automatically and immediately terminate, without any further action required by either Party, and shall be of no further force or effect. In such event, neither Party shall have any liability or obligation to the other Party under or in connection with this Agreement, except as otherwise provided in the Purchase Agreement.
Section 4.5 — Effect of Termination
(a) Termination or expiration of this Agreement (in whole or in part) shall not relieve either Party of any obligation or liability that has accrued prior to the effective date of such termination or expiration, including the obligation of the Service Recipient to pay all Service Charges accrued through the effective date of termination and the obligation of the Service Provider to complete any Services in progress as of the date of receipt of a termination notice, to the extent reasonably practicable and as requested by the Service Recipient.
(b) The following provisions of this Agreement shall survive the termination or expiration of this Agreement and shall continue in full force and effect in accordance with their respective terms: Article I (Definitions), Section 3.3 (Payment Terms, solely with respect to amounts accrued prior to termination), Section 3.4 (Taxes), this Section 4.5 (Effect of Termination), Article VI (Confidentiality and Data Protection), Article VII (Indemnification and Limitation of Liability), Article VIII (Dispute Resolution), and Article X (General Provisions).
(c) Upon the termination or expiration of this Agreement (in whole or in part), the Service Provider shall provide reasonable cooperation to the Service Recipient, at the Service Recipient's expense, in transitioning the terminated or expired Services to the Service Recipient or to a third-party designee of the Service Recipient, including the orderly transfer of data, records, files, work product, and other materials in the Service Provider's possession that relate to the terminated or expired Services.
(d) Within thirty (30) days following the Transition Completion Date, the Service Provider shall return or destroy (at the Service Recipient's election) all Confidential Information of the Service Recipient in the Service Provider's possession or control, other than copies required to be retained by applicable Law or the Service Provider's document retention policies, and shall certify such return or destruction in writing to the Service Recipient.
ARTICLE V — GOVERNANCE AND SERVICE MANAGEMENT
Section 5.1 — Service Managers
(a) Within five (5) Business Days after the Closing Date, each Party shall designate in writing to the other Party a Service Manager to serve as such Party's primary point of contact for all matters relating to the day-to-day coordination, administration, and oversight of the Services. The initial Service Managers shall be:
(i) Service Recipient's Service Manager: Natalie Reiner, Senior Vice President, Corporate Development, Penterra Pharmaceuticals Corp., 1100 Meridian Boulevard, Suite 400, Princeton, NJ 08540; telephone: (609) 555-3200; email: nreiner@penterrapharma.com.
(ii) Service Provider's Service Manager: Steven R. Kessler, Chief Financial Officer, Veridian Biosciences, Inc., 550 Gateway Drive, Cambridge, MA 02142; telephone: (617) 555-8400; email: skessler@veridianbio.com.
(b) Each Service Manager shall be authorized to act on behalf of his or her respective Party with respect to the day-to-day management and coordination of the Services, including the review and approval of invoices, the resolution of operational issues, the coordination of Migration Plan activities, and communications between the Parties regarding the Services. For the avoidance of doubt, the Service Managers shall not have authority to amend this Agreement or to bind their respective Parties to any material modification of the terms hereof without appropriate corporate authorization.
(c) Either Party may change its designated Service Manager at any time by delivering written notice to the other Party. Any replacement Service Manager shall have qualifications, authority, and seniority reasonably comparable to the individual being replaced.
Section 5.2 — Transition Steering Committee
(a) Within ten (10) Business Days after the Closing Date, the Parties shall establish a Transition Steering Committee (the "TSC") to oversee the overall transition process and the provision of Services under this Agreement. The TSC shall be composed of:
(i) two (2) representatives designated by the Service Recipient, one of whom shall be the Service Recipient's Service Manager; and
(ii) two (2) representatives designated by the Service Provider, one of whom shall be the Service Provider's Service Manager.
(b) The TSC shall meet at least bi-weekly (every two (2) weeks), either in person or by videoconference, or more frequently as reasonably requested by either Party. Meetings of the TSC shall be chaired alternately by the Service Recipient's Service Manager and the Service Provider's Service Manager (or their respective designees). The Service Provider's Service Manager shall be responsible for preparing and distributing an agenda at least two (2) Business Days prior to each meeting, and the Service Recipient's Service Manager shall be responsible for preparing and distributing written minutes of each meeting within five (5) Business Days following such meeting.
(c) The TSC shall be responsible for:
(i) reviewing and monitoring the performance of the Services, including compliance with applicable service levels and quality standards;
(ii) reviewing and approving the Migration Plan and any updates or amendments thereto;
(iii) identifying and addressing any issues, risks, or impediments relating to the provision or transition of the Services;
(iv) coordinating the activities of the Service Provider and the Service Recipient in connection with the transition process;
(v) establishing, monitoring, and evaluating key performance indicators ("KPIs") for each Service category, which KPIs shall be documented and reviewed at each bi-weekly meeting;
(vi) reviewing and approving any proposed changes to the scope, timing, or key personnel for any Service category; and
(vii) such other matters as the Parties may mutually agree.
(d) The TSC shall endeavor to reach decisions by consensus. In the event that the TSC is unable to reach consensus on any matter, such matter shall be escalated to the applicable escalation contacts designated in Section 8.1 for resolution.
(e) Either Party may change its designated TSC representatives at any time by delivering written notice to the other Party. Any replacement TSC representative shall have qualifications, authority, and seniority reasonably comparable to the individual being replaced.
Section 5.3 — Migration Plan
(a) Within thirty (30) days after the Closing Date, the Service Managers shall jointly develop a comprehensive Migration Plan for each Service category, setting forth the activities, milestones, timelines, and responsibilities for transitioning each Service from the Service Provider to the Service Recipient's own internal systems, personnel, and capabilities.
(b) The Migration Plan for each Service category shall include, at a minimum, the following elements:
(i) Current State Description: A description of the current manner in which the applicable Service is being provided, including the systems, processes, personnel, and third-party resources utilized.
(ii) Target State Description: A description of the desired end-state in which the Service Recipient will have assumed full responsibility for the applicable function using its own internal capabilities, systems, and personnel.
(iii) Key Migration Activities: A detailed list of the activities and tasks required to transition from the current state to the target state, organized by phase and workstream.
(iv) Dependencies: Identification of any dependencies, prerequisites, or critical path items that must be addressed in order to achieve the target state, including dependencies on third-party vendors, regulatory approvals, or other Services.
(v) Responsible Personnel: Assignment of specific individuals from each Party (and, where applicable, from third-party vendors) who will be responsible for each migration activity.
(vi) Target Completion Dates: Estimated target dates for the completion of each migration activity and for the overall transition of each Service category.
(vii) Status Tracking: A mechanism for tracking and reporting the status of each migration activity, including a color-coded status indicator (green/yellow/red) for ease of reporting.
(c) The Migration Plan shall be submitted to the TSC for review and approval. Once approved by the TSC, the Migration Plan shall be attached to this Agreement as an updated Schedule C and shall be reviewed and updated at each bi-weekly TSC meeting. The Parties shall cooperate in good faith to implement the Migration Plan in accordance with its terms and timelines.
(d) The Migration Plan shall be subject to the template set forth in Schedule C attached hereto, which template shall serve as the starting framework for the development of the Migration Plan for each Service category.
Section 5.4 — Reporting
(a) The Service Provider shall prepare and deliver to the Service Recipient a monthly written report (each, a "Monthly Service Report"), to be delivered concurrently with the monthly invoice described in Section 3.2, summarizing the following information:
(i) a description of the Services performed during the preceding calendar month, organized by Service category;
(ii) the status of the Migration Plan milestones for each Service category, including a comparison of actual progress against target completion dates and an explanation of any variances;
(iii) any changes in key personnel who have been performing the Services, including any departures, reassignments, or new personnel additions;
(iv) identification and description of any material issues, risks, or impediments relating to the provision of the Services or the execution of the Migration Plan, together with proposed mitigation measures;
(v) forecasted Service Charges for the upcoming calendar month, organized by Service category; and
(vi) such other information as the Service Recipient may reasonably request from time to time.
(b) In addition to the Monthly Service Reports, the Service Provider shall promptly notify the Service Recipient of any material event, development, or circumstance that could reasonably be expected to adversely affect the provision of any Service or the execution of the Migration Plan, including any significant personnel changes, regulatory actions, system outages, security incidents, or force majeure events.
ARTICLE VI — CONFIDENTIALITY AND DATA PROTECTION
Section 6.1 — Confidentiality Obligations
(a) Each Party shall maintain the confidentiality of all Confidential Information of the other Party received in connection with the negotiation, execution, or performance of this Agreement or the Services, and shall not disclose, publish, or otherwise disseminate any such Confidential Information to any third party, except as expressly permitted by this Section 6.1 or as otherwise required by applicable Law.
(b) The confidentiality obligations set forth in this Section 6.1 are intended to be consistent with, and supplementary to, the confidentiality obligations set forth in (i) the Confidentiality Agreement, dated as of March 4, 2024, by and between Penterra Pharmaceuticals Corp. and Veridian Biosciences, Inc., and (ii) the confidentiality provisions of the Purchase Agreement, including Sections 5.4 and 10.12 thereof. In the event of any conflict between the confidentiality obligations set forth in this Agreement and those set forth in the Confidentiality Agreement or the Purchase Agreement, the more restrictive obligation shall control.
(c) Each Party may disclose Confidential Information of the other Party only to those of its (and its Affiliates') employees, officers, directors, agents, consultants, advisors, and representatives who have a need to know such information in connection with the performance or receipt of the Services, and who are bound by confidentiality obligations no less restrictive than those set forth in this Article VI. Each Party shall be responsible for any breach of these confidentiality obligations by any such individual to whom it has disclosed Confidential Information.
(d) The confidentiality obligations set forth in this Section 6.1 shall not apply to information that: (i) is or becomes generally available to the public other than as a result of a disclosure by the receiving Party in violation of this Agreement; (ii) was available to the receiving Party on a non-confidential basis prior to its disclosure under this Agreement; (iii) becomes available to the receiving Party on a non-confidential basis from a source other than the disclosing Party, provided that such source is not known by the receiving Party to be bound by a confidentiality obligation to the disclosing Party; or (iv) is independently developed by the receiving Party without use of or reference to the disclosing Party's Confidential Information.
(e) The obligations of confidentiality set forth in this Article VI shall survive the termination or expiration of this Agreement and shall remain in full force and effect for a period of five (5) years following the Transition Completion Date, or such longer period as may be required by applicable Law.