CALDERWOOD & HARKNESS LLP Counselors at Law
One Liberty Plaza, 52nd Floor New York, New York 10006
Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com
September 5, 2023
VIA EMAIL AND HAND DELIVERY
David Orenstein, Esq. General Counsel & Corporate Secretary Penterra Pharmaceuticals Corp. 400 Meridian Parkway, Suite 1200 Princeton, New Jersey 08540
Re: Engagement of Calderwood & Harkness LLP as Issuer's Counsel — Registered Selling-Stockholder Secondary Offering of Common Stock of Penterra Pharmaceuticals Corp.
Dear David:
Calderwood & Harkness LLP ("C&H," "we," "us," or the "Firm") is pleased to confirm the terms of our engagement to represent Penterra Pharmaceuticals Corp., a Delaware corporation ("Penterra," "PPC," or the "Company"), as issuer's counsel in connection with the proposed registered selling-stockholder secondary offering (the "Offering") of shares of PPC's common stock, par value $0.001 per share, listed on the Nasdaq Global Select Market under the ticker symbol "PNTR." We very much appreciate the opportunity to work with you and the Penterra team on this important transaction, and we are committed to providing the highest quality legal services in connection with the Offering.
This engagement letter (this "Letter") sets forth the scope of our engagement, the fee arrangement, staffing, and other terms governing our representation of the Company. This engagement shall be effective as of September 5, 2023. We ask that you review the terms set forth herein carefully and, if acceptable, countersign and return a copy of this Letter to confirm the Company's acceptance. We are, of course, available to discuss any questions or comments you may have.
1. Scope of Representation
We have been engaged to represent PPC as the issuer in connection with the Offering, which is a secondary offering by certain selling stockholders (each, a "Selling Stockholder" and collectively, the "Selling Stockholders"). The Selling Stockholders are members of the Castellano founding family, specifically: Dr. Elena Castellano, Dr. Riccardo Castellano, Dr. Marco Castellano, and Castellano Family Holdings LLC (a Delaware limited liability company controlled by the Castellano family).
The Offering contemplates the sale by the Selling Stockholders of up to 6,250,000 shares of the Company's common stock, par value $0.001 per share (the "Base Shares"), with an additional over-allotment option granted by the Selling Stockholders to the underwriters to purchase up to an additional 937,500 shares of common stock (the "Option Shares" and, together with the Base Shares, the "Shares"). The Offering will be conducted under the Company's existing shelf registration statement on Form S-3 (File No. 333-274851), which was declared effective by the United States Securities and Exchange Commission (the "SEC") on August 22, 2023. For the avoidance of doubt, PPC will not be selling any shares in the Offering and will not receive any proceeds from the sale of the Shares by the Selling Stockholders.
The scope of our engagement includes, without limitation, the following legal services:
(a) Lock-Up Waiver Coordination. Coordination and negotiation of lock-up waiver requests to the lead underwriters of PPC's initial public offering completed on April 17, 2023 (the "IPO"), namely Ridgeline Securities LLC, Broadmark Capital Inc., and Morningstar Zanthor & Co., to obtain early release of the Selling Stockholders from the 180-day lock-up agreements entered into by the Selling Stockholders in connection with the IPO that would otherwise remain in effect until approximately October 14, 2023. This will include the preparation and submission of written waiver requests, negotiation of the terms and conditions of any partial or full release, and coordination with the Selling Stockholders' personal counsel in connection therewith.
(b) Prospectus Supplement. Preparation, review, and filing of the preliminary prospectus supplement and the final prospectus supplement to the base prospectus contained in the Form S-3 shelf registration statement, to be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended (the "Securities Act"). This will include the drafting of all material sections of the prospectus supplement, including the risk factors, selling stockholder table, plan of distribution, dilution, use of proceeds, and all other sections customarily included in a prospectus supplement for a secondary offering of this nature.
(c) SEC Filings. Preparation and/or review of all SEC filings related to the Offering, including but not limited to any free writing prospectus permitted under Rule 433 under the Securities Act, any pricing term sheet, and any Form 8-K current reports required to be filed by the Company in connection with the Offering or events related thereto.
(d) Section 16 Compliance Memoranda. Preparation of memoranda regarding Section 16 reporting obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including Form 4 filing obligations for any insider Selling Stockholders who are subject to Section 16(a) reporting requirements, and coordination with the Company's corporate secretary to ensure timely filings.
(e) Underwriting Agreement. Negotiation and review of the Underwriting Agreement (the "Underwriting Agreement") to be entered into among PPC, the Selling Stockholders, and the underwriters in connection with the Offering. The underwriter syndicate is expected to consist of Ridgeline Securities LLC, acting as lead left book-running manager, Broadmark Capital Inc., acting as joint book-running manager, and Linden Groves & Co. and Harborview Partners LLC, each acting as a co-manager (collectively, the "Underwriters"). Our engagement includes review of all schedules, exhibits, and ancillary agreements attached to or contemplated by the Underwriting Agreement.
(f) New Lock-Up Agreements. Preparation and negotiation of new 90-day lock-up agreements to be entered into by the Selling Stockholders in favor of the Underwriters in connection with the Offering, restricting future sales, hedging transactions, and other dispositions of the Company's common stock for a period of 90 days following the date of the final prospectus supplement.
(g) Closing Deliverables. Preparation of all customary closing deliverables required to be delivered by the Company in connection with the closing of the Offering, including, without limitation, the officer's certificate, the secretary's certificate (including certifications of incumbency, corporate resolutions, and the Company's certificate of incorporation and bylaws), board resolutions authorizing the Company's participation in the Offering, good standing certificates from the State of Delaware and such other jurisdictions as may be required, and transfer agent direction letters to the Company's transfer agent, Pinnacle Trust & Transfer Co.
(h) Legal Opinion and Negative Assurance Letter. Delivery of a legal opinion (validity opinion) to the Underwriters addressing the due authorization, valid issuance, fully paid, and non-assessable status of the Shares, and delivery of a negative assurance letter (commonly referred to as a "10b-5 letter") addressed to the Underwriters, each in customary form and substance for transactions of this type.
(i) Working Group Coordination. Coordination with all members of the working group, including: underwriters' counsel, Caldwell, Pearce & Strauss LLP (Margaret Hui, Partner); the Selling Stockholders' personal counsel, Whitfield & Garza LLP (Patricia Velázquez, Partner); the Company's independent registered public accounting firm, Graystone & Whitmore LLP; the Company's transfer agent, Pinnacle Trust & Transfer Co.; and the financial printer, Apex Financial Printing Inc. This coordination will include participation in organizational calls, drafting sessions, due diligence calls, and pricing and closing calls.
(j) Closing Documentation. Preparation of the closing checklist, closing memorandum, closing index, and comprehensive document binder (in electronic form and, if requested, in hard copy) memorializing the Offering and all related transaction documents.
(k) Other Related Services. Such other legal services reasonably related to the foregoing as may be requested by PPC from time to time during the course of the engagement, including but not limited to the review of Nasdaq listing-related notices, stockholder communications, and ancillary corporate matters directly arising from the Offering.
2. Matters Outside the Scope of Engagement
To ensure clarity regarding the boundaries of our representation, the following matters are expressly excluded from the scope of this engagement:
(a) No Representation of Selling Stockholders. C&H does not represent the Selling Stockholders in their personal or individual capacity in connection with the Offering. The Selling Stockholders — Dr. Elena Castellano, Dr. Riccardo Castellano, Dr. Marco Castellano, and Castellano Family Holdings LLC — are separately represented by Whitfield & Garza LLP (Patricia Velázquez, Partner). While we will coordinate with Whitfield & Garza LLP as part of the working group, our duties of loyalty, confidentiality, and care run exclusively to Penterra Pharmaceuticals Corp. as our client. The Selling Stockholders should look exclusively to their own counsel for legal advice regarding their participation in the Offering, including the tax consequences of the sale of Shares.
(b) No Representation of Underwriters. C&H does not represent and will not represent the Underwriters in connection with the Offering. The Underwriters are separately represented by Caldwell, Pearce & Strauss LLP (Margaret Hui, Partner). Our negotiation of the Underwriting Agreement and related documents will be conducted solely on behalf of the Company and in the Company's interest.
(c) No Tax Advice. C&H will not be providing tax advice to PPC or to any other party in connection with the Offering. The Company and the Selling Stockholders should consult their respective tax advisors regarding any federal, state, local, or foreign tax consequences arising from or related to the Offering. Nothing in any document prepared by C&H in connection with the Offering should be construed as tax advice.
(d) No Litigation or Enforcement Matters. This engagement does not cover any litigation, arbitration, regulatory investigation, enforcement action, or similar proceeding that may arise in connection with, or following the completion of, the Offering. Should any such matter arise, the Company would be free to engage C&H or another firm to provide representation, subject to a separate engagement letter and fee arrangement.
(e) No Future Transactions. This engagement does not cover any future offerings, financings, capital markets transactions, mergers and acquisitions, or other corporate transactions beyond the specific Offering described in Section 1 of this Letter. Any such engagement would require a separate engagement letter.
3. Staffing
The following attorneys will be primarily responsible for the delivery of legal services under this engagement:
• Jennifer Kwon, Partner — Ms. Kwon will serve as the Responsible Partner on this engagement. She will provide overall supervision and strategic direction of the representation, lead key interactions with senior Company management and the board of directors, and be involved in all material negotiations and strategic decisions relating to the Offering.
• Theodore Langston, Partner — Mr. Langston will serve as the Billing Partner on this engagement. He will be involved in key transaction negotiations, including the negotiation of the Underwriting Agreement, and will be responsible for the delivery of the legal opinion and negative assurance letter addressed to the Underwriters.
• Audrey Zhou, Senior Associate — Ms. Zhou will serve as the Lead Associate on this engagement. She will be responsible for the day-to-day management of the transaction, including the drafting of the prospectus supplement, SEC filings, and closing deliverables, as well as coordination with all working group parties.
• Brendan Walsh, Associate — Mr. Walsh will serve as a Working Associate on this engagement. He will support Ms. Zhou in drafting, due diligence review, closing checklist management, and document compilation and organization.
Additional attorneys, paralegals, and legal staff may be assigned to the engagement as needed to ensure the timely and efficient delivery of legal services. The Firm will provide prior notice to PPC before any additional attorney with a billing rate exceeding $750 per hour is assigned to the engagement. Any questions or communications regarding the engagement may be directed to Jennifer Kwon (jkwon@calderwoodharkness.com; (212) 506-7142) or Audrey Zhou (azhou@calderwoodharkness.com; (212) 506-7389).
4. Fees and Billing Arrangements
Fee Structure. The Firm and PPC have agreed to a capped fee arrangement for this engagement. Total legal fees for the services described in Section 1 shall not exceed Four Hundred Eighty-Five Thousand Dollars ($485,000) (the "Fee Cap"), exclusive of disbursements and out-of-pocket expenses as described in Section 5 below.
Billing Rates. Work performed under this engagement will be billed at the following hourly rates for the attorneys identified above:
Time will be recorded in increments of one-tenth of an hour (six minutes) and billed at the foregoing rates, subject in all cases to the Fee Cap. Should the aggregate fees for time actually recorded and billed at the above rates exceed $485,000, PPC's obligation for legal fees shall be limited to the Fee Cap amount. For the avoidance of doubt, the Fee Cap represents the maximum amount of legal fees that PPC will be required to pay under this engagement; the actual fees charged may be less than the Fee Cap, depending on the time expended.
If the scope of the engagement is materially expanded beyond the services described in Section 1 — for example, due to significant changes in the structure of the Offering, additional SEC comment letters requiring substantial additional work, or the need for supplemental filings not contemplated at the outset — the Fee Cap may be adjusted by mutual written agreement of the Firm and PPC. The Firm will promptly notify PPC if it believes that a material expansion of scope has occurred or is likely to occur, and will not incur fees in excess of the Fee Cap without PPC's prior written consent.
The Fee Cap does not cover disbursements and out-of-pocket expenses, which are addressed separately in Section 5 below.
5. Disbursements and Out-of-Pocket Expenses
In addition to the legal fees subject to the Fee Cap, PPC will reimburse the Firm for reasonable out-of-pocket disbursements incurred in connection with the engagement. Such disbursements may include, without limitation, the following:
• Document reproduction and printing costs;
• Overnight courier and delivery charges (e.g., Severin Partners LLC, Halcyon Partners LLC);
• Long-distance telephone and videoconference charges;
• Travel expenses, including airfare, ground transportation, lodging, and meals, if any travel is required in connection with the Offering;
• SEC filing fees and EDGAR filing costs;
• Online legal research charges (e.g., Westmark Data Systems, Calderon Systems, Cascade Services Inc.);
• Charges imposed by third-party service providers in connection with the Offering; and
• Other reasonable third-party costs directly related to the engagement.
All disbursements will be billed at the Firm's actual cost and are not subject to the Fee Cap. The Firm will use reasonable efforts to minimize disbursement costs and will not impose any administrative surcharge or markup on third-party charges. The Firm will consult with PPC in advance regarding any single disbursement that is expected to exceed Five Thousand Dollars ($5,000).
6. Billing and Payment Terms
The Firm will submit monthly invoices to PPC for legal fees incurred and disbursements during the preceding calendar month. Each invoice will include a summary of professional fees organized by attorney, showing the hours worked and amounts billed by each timekeeper, together with an itemized listing of disbursements. Invoices will be prepared in a format consistent with the Firm's standard billing practices and will contain sufficient detail to permit PPC to review and verify the charges.
All invoices are payable within thirty (30) days of receipt. Invoices that remain unpaid for more than sixty (60) days following the date of the invoice may, at the Firm's discretion, accrue interest at a rate of one percent (1%) per month on the outstanding balance, or the maximum rate permitted by applicable law, whichever is less.
The Billing Partner for purposes of invoice inquiries and billing-related communications is Theodore Langston (tlangston@calderwoodharkness.com; (212) 506-7255). All invoices will be sent to the attention of David Orenstein, General Counsel & Corporate Secretary, at the Company's headquarters address set forth above, or to such other mailing address or email address as PPC may designate in writing from time to time.
7. Client Identity; No Representation of Selling Stockholders
The Firm's client in this engagement is Penterra Pharmaceuticals Corp., and not any individual officer, director, employee, or stockholder of PPC. Our duties of loyalty, confidentiality, and professional responsibility run solely to the Company as an entity. While we may interact with individual officers, directors, employees, and representatives of PPC in the course of this engagement, such individuals are not our clients by virtue of such interactions.
Without limiting the generality of the foregoing, the Firm does not represent, and shall not be deemed to represent, any of the Selling Stockholders, the Castellano family members individually, Castellano Family Holdings LLC, or any other person or entity in connection with the Offering. PPC acknowledges and confirms that the Selling Stockholders have retained their own independent legal counsel, Whitfield & Garza LLP, and that the Selling Stockholders should look exclusively to Whitfield & Garza LLP for legal advice regarding their interests, rights, and obligations in connection with the Offering.
8. Conflicts of Interest
The Firm has conducted a conflicts check in accordance with its standard procedures and, based on the information currently available to us, has not identified any conflict of interest that would preclude the Firm from representing PPC in connection with the Offering. To the best of our knowledge, no attorney expected to work on this matter has any personal, financial, or professional relationship with any Selling Stockholder, Underwriter, or other transaction participant that would give rise to a conflict or the appearance of a conflict.
If an actual or potential conflict of interest arises during the course of this engagement, the Firm will promptly notify PPC in writing and will take appropriate steps in accordance with the New York Rules of Professional Conduct and any other applicable rules of professional conduct, which may include seeking PPC's informed written consent to continued representation, implementing appropriate ethical screens, or, if necessary, withdrawing from the engagement.
PPC acknowledges that the Firm is a large, full-service law firm that represents many other clients in a wide range of matters. The Firm may currently represent, and may in the future represent, other clients in matters that are unrelated to this engagement and that may involve positions or interests adverse to PPC. PPC hereby consents to such representations, provided that they do not involve the specific subject matter of this engagement (i.e., the Offering of Shares by the Selling Stockholders). This consent is limited to adverse representations in matters unrelated to the Offering and does not constitute a general prospective waiver of conflicts in all future matters.
9. Confidentiality
The Firm will maintain the confidentiality of all non-public information provided by PPC or its representatives in connection with this engagement, in accordance with our obligations under the applicable rules of professional conduct and the attorney-client privilege. The Firm will not disclose such information to any third party without PPC's prior written consent, except as may be required by applicable law, regulation, or court order, or as necessary in connection with the performance of our services under this engagement (for example, in the preparation and filing of SEC documents or in the delivery of opinions addressed to the Underwriters).
The Firm's obligations under this Section 9 shall survive the termination or expiration of this engagement and shall continue indefinitely, except to the extent that the information in question becomes publicly available through no fault of the Firm or is independently developed by the Firm without reference to PPC's confidential information.
10. Document Retention
Upon completion of the engagement, the Firm will maintain files and records related to this matter in accordance with the Firm's standard document retention policies, as in effect from time to time. Currently, the Firm's policy provides for the retention of closed matter files for a period of ten (10) years following the closing of the matter, after which time the Firm reserves the right to destroy or dispose of such files without further notice, except as provided below.
Any original documents provided by PPC to the Firm in connection with this engagement will be returned to PPC upon written request at any time, whether before or after the closing of the Offering. The Firm may retain copies of such documents for its files.
Prior to the destruction of any files related to this engagement pursuant to the Firm's retention schedule, the Firm will provide reasonable prior written notice to PPC (at PPC's last known address) and will afford PPC a reasonable opportunity to request the return of such files. If PPC does not respond within sixty (60) days of such notice, the Firm shall be entitled to proceed with the destruction of the files.
11. Termination
Either party may terminate this engagement at any time upon written notice to the other party, subject to the Firm's professional obligations and any applicable rules of professional conduct governing withdrawal from representation. In the event of termination by either party, PPC shall be obligated to pay for all legal fees incurred through the effective date of termination (subject to the Fee Cap) and all disbursements and out-of-pocket expenses incurred through the effective date of termination.
Upon termination, the Firm will take all steps reasonably necessary to protect PPC's interests, including the orderly transition of the matter to successor counsel designated by PPC and the return of PPC's files and documents. The Firm's obligations to deliver any opinion letters, negative assurance letters, or other closing deliverables in connection with the Offering shall cease upon the effective date of termination, except as may otherwise be agreed in writing by the parties.
12. Limitation of Liability
The Firm's aggregate liability to PPC arising out of or relating to this engagement, whether based on breach of contract, tort (including negligence), strict liability, or any other theory of liability, shall not exceed the total amount of legal fees actually paid by PPC to the Firm under this engagement, except in cases of the Firm's willful misconduct or gross negligence, in which case this limitation shall not apply.
In no event shall the Firm be liable to PPC for any consequential, incidental, indirect, special, or punitive damages, including but not limited to lost profits, lost revenue, diminution in value, or damage to reputation, regardless of whether the Firm has been advised of the possibility of such damages and regardless of the form of action.
The limitations set forth in this Section 12 shall apply to the fullest extent permitted by applicable law and shall survive the termination or expiration of this engagement.
13. Governing Law
This Letter and the relationship between the Firm and PPC in connection with this engagement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of laws principles. Any dispute arising out of or relating to this Letter or the engagement shall be resolved exclusively in the state or federal courts located in the State of Delaware, and each party hereby consents to the personal jurisdiction and venue of such courts.
14. Entire Agreement; Amendments
This Letter constitutes the entire agreement between the Firm and PPC with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, representations, understandings, and agreements, whether oral or written, relating to the engagement described herein. No modification, amendment, or waiver of any provision of this Letter shall be effective unless made in writing and signed by both the Firm and PPC.
We are genuinely enthusiastic about the opportunity to represent Penterra Pharmaceuticals Corp. in connection with this significant transaction. We believe that the Offering will proceed smoothly and efficiently, and we are committed to delivering the highest level of legal service throughout the process.
We respectfully request that you review the terms set forth herein and, if they are acceptable, countersign this Letter in the space provided below and return a copy to us at your earliest convenience. Please do not hesitate to contact Jennifer Kwon or Audrey Zhou if you have any questions or would like to discuss any aspect of this Letter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Jennifer Kwon, Partner
Telephone: (212) 506-7142
Email: jkwon@calderwoodharkness.com
ACKNOWLEDGMENT AND ACCEPTANCE
By executing this Letter in the space provided below, the undersigned hereby confirms that Penterra Pharmaceuticals Corp. has reviewed and agrees to the terms and conditions of the engagement set forth herein.
ACKNOWLEDGED AND AGREED:
PENTERRA PHARMACEUTICALS CORP.
By: ________
Name: David Orenstein
Title: General Counsel & Corporate Secretary
Date: September _, 2023
Enclosures: None.
cc: Lisa Hargrove, Chief Financial Officer, Penterra Pharmaceuticals Corp. cc: Theodore Langston, Partner, Calderwood & Harkness LLP cc: Audrey Zhou, Senior Associate, Calderwood & Harkness LLP
| Attorney | Position | Hourly Rate |
| Jennifer Kwon | Partner | $1,850 |
| Theodore Langston | Partner | $1,750 |
| Audrey Zhou | Senior Associate | $1,150 |
| Brendan Walsh | Associate | $875 |