INTERNAL DEAL MEMORANDUM
CONFIDENTIAL / ATTORNEY WORK PRODUCT
ATTORNEY-CLIENT PRIVILEGED
This memorandum has been prepared by the Capital Markets Group of Calderwood & Harkness LLP for internal use only. It is protected by the attorney-client privilege and the work product doctrine. It should not be disclosed to any person outside of Calderwood & Harkness LLP without the prior written consent of the responsible partner. Unauthorized disclosure may result in a waiver of applicable privileges.
FROM: Audrey Zhou, Senior Associate, and Brendan Walsh, Associate, Capital Markets Group
TO: Capital Markets Group, Calderwood & Harkness LLP
DATE: September 12, 2023
RE: Penterra Pharmaceuticals Corp. — $260,000,000 Selling-Stockholder Secondary Offering
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H") has been engaged as issuer's counsel to Penterra Pharmaceuticals Corp. ("Penterra," "PPC," or the "Company"), a Delaware corporation listed on the Nasdaq Global Select Market (ticker: PNTR), in connection with a registered selling-stockholder secondary offering of shares of common stock (the "Offering"). The engagement was opened on September 5, 2023, and the engagement letter between C&H and PPC was fully executed on the same date.
The deal team at C&H consists of the following personnel: Jennifer Kwon serves as Responsible Partner, Theodore Langston serves as Billing Partner, Audrey Zhou serves as lead associate, and Brendan Walsh serves as working associate. Day-to-day deal management and drafting responsibilities will be shared between Audrey and Brendan, with Jennifer and Ted providing oversight on all substantive workstreams and client-facing communications.
The Offering contemplates a base offering of 6,250,000 shares of common stock at a public offering price of $41.60 per share, for an aggregate base deal value of $260,000,000. All shares are being sold by the Castellano founding family (consisting of Dr. Elena Castellano, Dr. Riccardo Castellano, Dr. Marco Castellano, and Castellano Family Holdings LLC, collectively the "Selling Stockholders"). PPC is not selling any shares in the Offering and will receive no proceeds therefrom. The Selling Stockholders will bear the underwriting discount, and PPC will bear all other offering expenses.
The Offering is structured as a shelf takedown under PPC's existing Form S-3 shelf registration statement (File No. 333-274851), which was declared effective by the Securities and Exchange Commission (the "SEC") on August 22, 2023. A prospectus supplement will be prepared and filed pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended (the "Securities Act").
The key legal workstreams for C&H are as follows: (i) coordination of the lock-up waiver process with the three IPO syndicate leads (Ridgeline Securities LLC, Broadmark Capital Inc., and Morningstar Zanthor & Co.), each of which is a counterparty to the IPO lock-up agreements and must consent to the early release of lock-up restrictions; (ii) drafting and filing of the preliminary and final prospectus supplements; (iii) negotiation of the underwriting agreement and related transaction documents; and (iv) preparation and delivery of all closing deliverables, including our legal opinion, negative assurance letter, officer's and secretary's certificates, and related ancillary documents.
The target signing and pricing date is October 12, 2023, with settlement and closing expected on October 17, 2023, on a T+3 basis. The timeline is structured to align closely with—but slightly precede—the natural expiration of the 180-day IPO lock-up period on October 14, 2023, necessitating the lock-up waiver mechanics described in detail in Section V below.
II. BACKGROUND ON PENTERRA PHARMACEUTICALS CORP.
A. Company Overview
The full legal name of the issuer is Penterra Pharmaceuticals Corp. PPC is a corporation organized under the laws of the State of Delaware. Its principal executive offices are located at 400 Meridian Parkway, Suite 1200, Princeton, New Jersey 08540. PPC's registered agent in Delaware is actionaltional Registered Agents Inc., located at 251 Little Falls Drive, Wilmington, Delaware 19808.
PPC is a specialty pharmaceutical company focused on the development, manufacture, and commercialization of therapeutics for rare neurological disorders. The Company's lead product is NEUVANTA® (tavropitant), which received approval from the U.S. Food and Drug Administration ("FDA") in February 2023 for the treatment of a rare neurological condition. In addition to NEUVANTA®, PPC has three additional pipeline candidates currently in Phase II or Phase III clinical trials, which provide meaningful optionality for future revenue growth and diversification.
PPC's common stock is listed on the Nasdaq Global Select Market under the ticker symbol "PNTR." The Company's Central Index Key ("CIK") number assigned by the SEC is 0001987654. The Company's Employer Identification Number ("EIN") is 82-4039571.
B. IPO History
PPC completed its initial public offering on April 17, 2023. The IPO was priced at $22.00 per share, with the Company issuing 24,000,000 primary shares for aggregate gross proceeds of $528,000,000. The IPO underwriting syndicate was led by Ridgeline Securities LLC as lead left book-runner, with Broadmark Capital Inc. serving as joint book-runner and Morningstar Zanthor & Co. serving as co-manager.
In connection with the IPO, all directors, officers, and holders of 5% or more of PPC common stock entered into customary 180-day lock-up agreements. These lock-up agreements were executed in favor of the three IPO lead underwriters (Ridgeline, Broadmark, and Morningstar Zanthor) and restrict the sale, transfer, or other disposition of shares of PPC common stock (and securities convertible into or exercisable for common stock) for a period of 180 days following the closing of the IPO. The lock-up parties include, without limitation, the entire Castellano family (Dr. Elena Castellano, Dr. Riccardo Castellano, and Dr. Marco Castellano) and Castellano Family Holdings LLC. The lock-up mechanics are discussed in greater detail in Section V below.
C. Current Market Data (as of approximately September 5, 2023)
As of the date on which C&H's engagement was opened, the following market data was observed:
• Current Stock Price: Approximately $41.60 per share (closing price as of September 5, 2023), representing an approximately 89% increase from the IPO price of $22.00 per share.
• Market Capitalization: Approximately $4.8 billion (based on approximately 120,000,000 shares outstanding at approximately $40.00 per share).
• Shares Outstanding: 120,000,000 shares of common stock, par value $0.001 per share.
• CUSIP Number: 70831X 10 5.
The stock price appreciation since the IPO is attributable in significant part to the successful commercial launch of NEUVANTA® and to favorable clinical trial readouts for the Company's pipeline candidates during the spring and summer of 2023. Trading volumes have remained robust since the IPO, and the stock has generally been well-supported by buy-side institutional interest, which bodes well for the marketing and execution of the proposed secondary Offering.
D. Selected Financial Highlights
The following summary financial data is derived from PPC's publicly filed financial statements and is provided for context regarding the Company's financial condition and results of operations:
• FY 2022 Revenue: $387.4 million
• FY 2022 Net Income: $42.1 million
• H1 2023 Revenue: $312.6 million (annualized run rate: approximately $625.2 million)
• H1 2023 Net Income: $67.8 million
The Company's financial statements for FY 2022 and the interim period ended June 30, 2023 were audited and reviewed, respectively, by Graystone & Whitmore LLP ("Graystone"), the Company's independent registered public accounting firm. The engagement partner at Graystone is Thomas Reiter. C&H will coordinate with Graystone regarding the delivery of initial and bring-down comfort letters in connection with the Offering, as described further in Section VII.G below.
The Company's H1 2023 results reflect strong revenue growth driven primarily by NEUVANTA® launch dynamics and a favorable payor mix. The annualized revenue run rate of approximately $625 million represents a substantial increase over FY 2022, supporting the Company's growth narrative and providing a constructive backdrop for the Selling Stockholders' offering.
E. Key Officers and Directors
The Company's key officers and directors relevant to this transaction are as follows:
• Chief Executive Officer: Dr. Marco Castellano. Dr. Castellano is the son of the Company's co-founders and has served as CEO since the Company's founding. He is also a Selling Stockholder in the Offering and a Section 16 reporting person.
• Chief Financial Officer: Lisa Hargrove. Ms. Hargrove will be a signatory to the officer's certificate and will coordinate with Graystone and C&H on financial disclosure matters.
• General Counsel & Corporate Secretary: David Orenstein. Mr. Orenstein is the Company's primary legal contact and will serve as attorney-in-fact for the Selling Stockholders under the Power of Attorney and Custody Agreement. He will also execute the secretary's certificate at closing.
• Board Chair: Dr. Elena Castellano (co-founder). Dr. Castellano is the largest individual Selling Stockholder in the Offering and a Section 16 reporting person.
• Board Member (Non-Executive): Dr. Riccardo Castellano (co-founder). Dr. Castellano is a Selling Stockholder in the Offering and a Section 16 reporting person.
III. DEAL STRUCTURE AND ECONOMICS
A. Offering Type
The Offering is structured as a registered selling-stockholder secondary offering (commonly referred to as a "follow-on" offering). No primary shares will be sold by PPC, and the Company will receive no proceeds from the Offering. All shares are being sold by the Selling Stockholders identified in Section IV below.
The Offering will be effected as a shelf takedown under PPC's existing Form S-3 shelf registration statement, filed with the SEC under File No. 333-274851 and declared effective on August 22, 2023. The base prospectus contained in the Form S-3 provides for the offer and sale of common stock (among other securities) by selling stockholders from time to time. The specific terms of the Offering will be set forth in a prospectus supplement to be prepared by C&H and filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act.
The use of the existing shelf registration statement eliminates the need for a new registration statement and materially compresses the transaction timeline. The shelf was sized to accommodate both primary and secondary offerings of a scope sufficient to cover the proposed Offering and any potential future transactions.
B. Securities Offered
The securities offered consist of 6,250,000 shares of common stock of PPC, par value $0.001 per share. The public offering price has been set at $41.60 per share, which is consistent with the closing price of PPC common stock on the Nasdaq Global Select Market as of September 5, 2023 (the date of engagement). The final pricing will be determined on the pricing date (October 12, 2023), and the public offering price in the final prospectus supplement may differ from the assumed price used herein depending on market conditions.
Based on the assumed public offering price:
• Base Offering Size: 6,250,000 shares × $41.60 per share = $260,000,000
C. Over-Allotment Option
In connection with the Offering, the Selling Stockholders will grant the underwriters a 30-day option (the "Over-Allotment Option" or "Greenshoe") to purchase up to 937,500 additional shares of common stock, representing 15% of the base offering size. The Over-Allotment Option may be exercised in whole or in part at any time within 30 days of the pricing date.
The economics of the Over-Allotment Option are as follows:
• Over-Allotment Shares: 937,500 shares
• Over-Allotment Value (if fully exercised): 937,500 × $41.60 = $38,985,000
• Maximum Offering Size (base + full Over-Allotment): 7,187,500 shares; approximately $299,000,000
• Over-Allotment Exercise Deadline: November 11, 2023 (30 calendar days following the pricing date of October 12, 2023)
• Over-Allotment Closing: November 16, 2023 (T+3 from exercise, if exercised on the deadline date)
The allocation of Over-Allotment shares among the Selling Stockholders is set forth in the table in Section IV.A below.
D. Underwriting discount and Commissions
The underwriting discount negotiated with the syndicate is 2.50% of the public offering price, or $1.04 per share. This discount is consistent with market terms for secondary offerings of this size in the specialty pharmaceutical sector. The underwriting discount is borne entirely by the Selling Stockholders and will be deducted from the gross proceeds otherwise payable to them.
The detailed economics are as follows:
• Underwriting discount Per Share: $41.60 × 2.50% = $1.04
• Total Underwriting Commission (Base Offering): $1.04 × 6,250,000 = $6,500,000
• Net Proceeds Per Share to Selling Stockholders: $41.60 − $1.04 = $40.56
• Net Proceeds to Selling Stockholders (Base Offering): $40.56 × 6,250,000 = $253,500,000
If the Over-Allotment Option is exercised in full, the additional underwriting commission would be $1.04 × 937,500 = $975,000, bringing total underwriting commissions to $7,475,000. Total net proceeds to the Selling Stockholders, including full Over-Allotment exercise, would be approximately $291,525,000.
E. Underwriting Commission Allocation
The underwriting commission will be allocated among the members of the underwriting syndicate as follows:
This allocation reflects Ridgeline's role as lead left book-runner and the senior economics typically associated with that position, as well as Broadmark's contribution as joint book-runner. The co-manager allocations for Linden Groves and Harborview are consistent with customary co-manager economics for transactions of this type and size.
IV. SELLING STOCKHOLDERS
A. Identification and Share Holdings
The Selling Stockholders in the Offering are four members and entities of the Castellano founding family. The following table sets forth the identity of each Selling Stockholder, their respective pre-offering share holdings, the number of shares offered in the base offering, the maximum number of shares subject to the Over-Allotment Option, and their post-offering share holdings assuming full exercise of the Over-Allotment Option:
Castellano Family Holdings LLC is a Delaware limited liability company, EIN 87-2165438, with a principal business address c/o Penterra Pharmaceuticals Corp., 400 Meridian Parkway, Suite 1200, Princeton, New Jersey 08540. Based on publicly available beneficial ownership filings, the managing members of Castellano Family Holdings LLC include Dr. Elena Castellano and Dr. Riccardo Castellano, who share voting and dispositive power over the shares held by the entity. The attribution of these shares for purposes of Section 13(d) and Section 16 reporting is addressed in Section XII below.
B. Ownership Percentages
Based on 120,000,000 shares of common stock outstanding, the ownership percentages of the Castellano family (collectively) are as follows:
• Pre-Offering Combined Family Holdings: 40,100,000 shares, representing approximately 33.4% of outstanding shares.
• Post-Offering Family Holdings (Base Only, no OA exercise): 33,850,000 shares, representing approximately 28.2% of outstanding shares.
• Post-Offering Family Holdings (Full Over-Allotment Exercise): 32,912,500 shares, representing approximately 27.4% of outstanding shares.
Even after giving effect to the Offering (including full exercise of the Over-Allotment Option), the Castellano family will remain the largest stockholder group of PPC, with beneficial ownership of approximately 27.4% of the outstanding shares. This continued significant ownership stake should serve to mitigate potential market concerns about the founding family reducing its commitment to the Company.
C. Public Float Impact
The Offering will result in a meaningful increase in the public float of PPC common stock:
• Public Float Pre-Offering: 120,000,000 total shares outstanding minus 40,100,000 Castellano family shares = 79,900,000 shares (approximately 66.6% of outstanding shares).
• Public Float Post-Offering (Base Only): 79,900,000 + 6,250,000 = 86,150,000 shares (approximately 71.8% of outstanding shares).
• Public Float Post-Offering (Full Over-Allotment Exercise): 79,900,000 + 7,187,500 = 87,087,500 shares (approximately 72.6% of outstanding shares).
The increase in public float is expected to be viewed favorably by institutional investors and index providers, as it enhances trading liquidity and may improve eligibility for inclusion in certain market indices.
D. Selling Stockholders' Personal Counsel
The Selling Stockholders are independently represented by Whitfield & Garza LLP, located at 590 Madison Avenue, 28th Floor, New York, New York 10022. The primary contact is Patricia Velázquez, Partner. Whitfield & Garza will review the underwriting agreement, the selling stockholder power of attorney and custody agreement, the new 90-day lock-up agreements, and the selling stockholder representations and closing certificate on behalf of the Selling Stockholders. C&H's representations in the Offering are on behalf of PPC as issuer only and do not extend to the Selling Stockholders.
V. LOCK-UP WAIVER MECHANICS
A. Original IPO Lock-Up
In connection with PPC's IPO, which closed on April 17, 2023, all directors, officers, and holders of 5% or more of PPC common stock entered into customary 180-day lock-up agreements. These agreements restrict the lock-up parties from, among other things, offering, selling, contracting to sell, pledging, granting any option to purchase, making any short sale, or otherwise transferring or disposing of any shares of common stock (or any securities convertible into or exercisable or exchangeable for common stock) during the lock-up period, subject to limited customary exceptions.
The lock-up period is 180 calendar days commencing on the IPO closing date of April 17, 2023. Accordingly, the lock-up expiration date is October 14, 2023 (180 days from April 17, 2023).
The lock-up parties include, without limitation, each member of the Castellano family and Castellano Family Holdings LLC, as well as all other directors and officers of PPC.
The lock-up agreements were executed by each lock-up party in favor of the three lead IPO underwriters—Ridgeline Securities LLC, Broadmark Capital Inc., and Morningstar Zanthor & Co. (collectively, the "IPO Underwriters")—as the parties with authority to grant waivers or releases from the lock-up restrictions.
B. Waiver Required for Secondary Offering
The target signing and pricing date for the Offering is October 12, 2023, which is two calendar days prior to the natural expiration of the IPO lock-up period on October 14, 2023. Because the Selling Stockholders will be contracting to sell shares (by executing the underwriting agreement) on October 12, 2023, and because the trade date for the shares will also be October 12, 2023, an early release of the lock-up restrictions is required.
The early release must be effective as of October 12, 2023, and must extend solely to (i) the shares being sold by the Selling Stockholders in the base offering and (ii) the additional shares subject to the Over-Allotment Option. The lock-up restrictions will remain in effect with respect to all other shares held by the lock-up parties (including the Selling Stockholders) until the natural expiration date of October 14, 2023.
Under the terms of the lock-up agreements, a waiver or release of the lock-up restrictions requires the unanimous consent of all three IPO Underwriters. This means that each of Ridgeline Securities LLC, Broadmark Capital Inc., and Morningstar Zanthor & Co. must affirmatively consent to the early release.
It is important to note that Morningstar Zanthor & Co. is not participating in the underwriting syndicate for the secondary Offering but nonetheless remains a party to the IPO lock-up agreements whose consent is required for any waiver or early release. Morningstar Zanthor has been contacted through its managing director, Diane Chaudhary, and has indicated a willingness to cooperate with the waiver process. However, until the formal consent is received, the lock-up waiver remains an open item and potential gating issue for the transaction.
C. Advance Notice Requirement
The lock-up agreements contain a customary provision requiring the IPO Underwriters to provide at least 14 calendar days' advance notice to PPC and the applicable lock-up party prior to the effectiveness of any waiver or release. This advance notice requirement is designed to give the Company and the market adequate time to prepare for the potential increase in tradeable shares.
Given that the gap between the requested waiver effective date (October 12, 2023) and the natural lock-up expiration (October 14, 2023) is only two calendar days, strict compliance with the 14-day advance notice requirement is not practically meaningful in this context. Accordingly, the advance notice provision itself is being waived by mutual consent of all relevant parties—the IPO Underwriters, the Selling Stockholders, and PPC—as part of the overall lock-up waiver process.
D. Waiver Request and Consent Correspondence
The waiver process is being managed as follows:
Lock-up waiver request letters were prepared by C&H and sent by PPC (signed by David Orenstein, General Counsel & Corporate Secretary) on September 18, 2023 to each of the three IPO Underwriters at the following addresses:
• Ridgeline Securities LLC
Attention: Jonathan Pryce-Hall, Managing Director
383 Madison Avenue New York, New York 10017
• Broadmark Capital Inc.
Attention: Samuel Okonkwo, Managing Director
200 Park Avenue New York, New York 10166
• Morningstar Zanthor & Co.
Attention: Diane Chaudhary, Managing Director
600 Lexington Avenue New York, New York 10022
Each waiver request letter identifies the Selling Stockholders, specifies the number of shares for which the early release is sought (including the Over-Allotment shares), states the requested effective date of the waiver (October 12, 2023), and requests a waiver of the 14-day advance notice requirement. The letters were reviewed by C&H and coordinated with Whitfield & Garza (selling stockholders' counsel) and Caldwell, Pearce & Strauss (underwriters' counsel) prior to dispatch.
All three consent letters were received on September 29, 2023. Each consent is unconditional and confirms the early release of the lock-up restrictions with respect to the specified shares effective as of October 12, 2023, as well as the waiver of the advance notice requirement. Copies of the executed consent letters have been saved to the deal file and will be included in the closing binder.
E. New 90-Day Lock-Up for Secondary Offering
In connection with the Offering, each Selling Stockholder will enter into a new 90-day lock-up agreement in favor of Ridgeline Securities LLC and Broadmark Capital Inc. as representatives of the underwriters for the secondary Offering. The key terms of the new lock-up are as follows:
• Commencement Date: October 17, 2023 (the closing date of the Offering).
• Expiration Date: January 15, 2024 (90 calendar days from the commencement date).
• Covered Shares: All shares of PPC common stock retained by the Selling Stockholders following the Offering (including following any exercise of the Over-Allotment Option).
• Restrictions: Substantially similar to the IPO lock-up restrictions, prohibiting sales, transfers, pledges, and other dispositions of the covered shares during the lock-up period, subject to limited customary exceptions.
The new lock-up agreements are being drafted by C&H and will be reviewed by Whitfield & Garza on behalf of the Selling Stockholders and by Caldwell, Pearce & Strauss on behalf of the underwriters. Execution of the new lock-up agreements is expected to occur concurrently with the execution of the underwriting agreement on October 12, 2023.
The new lock-up will be disclosed in the prospectus supplement as part of the description of the plan of distribution and the underwriting arrangements.
VI. UNDERWRITING SYNDICATE
A. Book-Running Managers
The underwriting syndicate for the Offering consists of two book-running managers and two co-managers.
Lead Left Book-Runner: Ridgeline Securities LLC
383 Madison Avenue New York, New York 10017
• Lead Banker: Jonathan Pryce-Hall, Managing Director
• Syndicate Desk: Angela Ferris, Vice President
Ridgeline served as lead left book-runner for PPC's IPO in April 2023 and has maintained a close advisory relationship with the Company since that time. Ridgeline will serve as stabilizing manager and will manage the bookbuilding process and the allocation of shares in the Offering.
Joint Book-Runner: Broadmark Capital Inc.
200 Park Avenue New York, New York 10166
• Samuel Okonkwo, Managing Director
Broadmark served as joint book-runner for PPC's IPO and has continued to provide equity research coverage and sales support to PPC. Broadmark will participate in the bookbuilding and allocation process alongside Ridgeline.
Ridgeline and Broadmark will act jointly as the "Representatives" of the underwriters for purposes of the underwriting agreement, the new lock-up agreements, and all other matters requiring action by the underwriters collectively.
B. Co-Managers. Linden Groves & Co.
745 Fifth Avenue New York, New York 10151
Linden Groves is a mid-cap focused investment bank with a strong specialty pharmaceutical practice. It did not participate in the IPO syndicate but was introduced by the Castellano family to broaden distribution for the secondary Offering.
Harborview Partners LLC
1 Federal Street Boston, Massachusetts 02110
Harborview is a regional investment bank with strong distribution capabilities among healthcare-focused institutional investors in the northeastern United States. It was added to the syndicate at the suggestion of Ridgeline to enhance retail and mid-tier institutional distribution.
C. Underwriters' Counsel
The underwriters are represented by:
Caldwell, Pearce & Strauss LLP 1251 Avenue of the Americas, 40th Floor New York, New York 10020
• Partner: Margaret Hui
• Associate: Ryan Petrosian
Caldwell, Pearce & Strauss is a well-known capital markets practice. Margaret Hui has extensive experience with secondary offerings in the pharmaceutical sector and has worked with Ridgeline on multiple prior transactions. Ryan Petrosian will handle the day-to-day associate-level drafting and document coordination on the underwriters' side.
VII. KEY TRANSACTION DOCUMENTS
This section summarizes the principal transaction documents that will be prepared, negotiated, and delivered in connection with the Offering. C&H is responsible for the preparation of documents on behalf of PPC as issuer, and will coordinate with Caldwell, Pearce & Strauss (underwriters' counsel) and Whitfield & Garza (selling stockholders' counsel) on all multi-party documents.
A. Prospectus Supplement
The prospectus supplement is the principal disclosure document for the Offering and will be prepared by C&H, with input from PPC management, Graystone (on financial information), and the underwriters.
• Preliminary Prospectus Supplement: A confidential draft of the preliminary prospectus supplement was circulated to the working group on September 11, 2023 for initial review and comment. Following the comment and revision process, the preliminary prospectus supplement was filed with the SEC on October 2, 2023. The preliminary prospectus supplement will be used during the road show and marketing period (October 9–11, 2023) as the offering document provided to prospective investors.
• Final Prospectus Supplement: The final prospectus supplement will be filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act on the pricing date, currently scheduled for October 12, 2023. The final prospectus supplement will contain the definitive pricing information (public offering price, underwriting discount, net proceeds to selling stockholders) and any updates to the disclosure based on developments since the filing of the preliminary prospectus supplement.
The prospectus supplement supplements the base prospectus contained in PPC's Form S-3 shelf registration statement (File No. 333-274851) and, together with the base prospectus, constitutes the registration statement for the shares being offered. The prospectus supplement will include, among other things, the following sections: (i) selling stockholder table (identifying each selling stockholder, pre-offering holdings, shares offered, and post-offering holdings); (ii) use of proceeds (confirming that PPC will receive no proceeds from the Offering); (iii) risk factors specific to the Offering; (iv) description of the lock-up waiver and the new 90-day lock-up; (v) plan of distribution; and (vi) underwriting terms and commission structure.
B. Underwriting Agreement
The underwriting agreement will be entered into among PPC (as issuer), the four Selling Stockholders (as sellers), and the four underwriters. The underwriting agreement will be in the standard form for selling-stockholder secondary offerings and will include, among other things:
• Representations and warranties from PPC regarding the accuracy and completeness of the registration statement and prospectus, the due authorization and valid issuance of the shares, the Company's corporate status and compliance with applicable law, and other customary matters.
• Representations and warranties from the Selling Stockholders regarding ownership of the shares being sold, authorization to sell, and the accuracy of information provided by the Selling Stockholders for inclusion in the prospectus supplement.
• Customary covenants, including PPC's covenant to maintain the effectiveness of the registration statement and to provide notice of certain events (e.g., stop orders, material developments).
• Cross-indemnification provisions among the issuer, the Selling Stockholders, and the underwriters, covering liabilities arising from material misstatements or omissions in the registration statement and prospectus.
• Conditions to closing, including the delivery of legal opinions, negative assurance letters, comfort letters, officer's and secretary's certificates, and other customary closing deliverables.
• The underwriting agreement will be governed by Delaware law.
The target date for execution of the underwriting agreement is October 12, 2023, concurrent with pricing.
C. Selling Stockholder Power of Attorney and Custody Agreement
Each Selling Stockholder will execute a Power of Attorney and Custody Agreement in which:
• David Orenstein, General Counsel & Corporate Secretary of PPC, is appointed as attorney-in-fact for each Selling Stockholder, with authority to execute the underwriting agreement, closing certificates, and other transaction documents on behalf of each Selling Stockholder.
• Pinnacle Trust & Transfer Co. (1 Ashbury Asset Advisors Plaza, 30th Floor, New York, New York 10004) is appointed as custodian for the shares to be delivered at closing. Pinnacle will hold the shares in custody pending settlement and will deliver them via DTC book-entry on the closing date upon instruction from the attorney-in-fact.
The Power of Attorney and Custody Agreement is a standard form document for selling-stockholder offerings. C&H will prepare the initial draft, with Whitfield & Garza reviewing and providing comments on behalf of the Selling Stockholders.
D. Lock-Up Waiver Documents
As described in detail in Section V above, the lock-up waiver documentation consists of:
• Three waiver request letters sent by PPC (signed by David Orenstein) to each of the three IPO Underwriters (Ridgeline, Broadmark, and Morningstar Zanthor), dated September 18, 2023.
• Three waiver consent letters received from the IPO Underwriters, each dated September 29, 2023.
All six documents (three requests and three consents) have been finalized and will be included in the closing binder.
E. New Lock-Up Agreements
As described in Section V.E above, each Selling Stockholder will execute a new 90-day lock-up agreement in favor of Ridgeline Securities LLC and Broadmark Capital Inc. as Representatives of the underwriters. These agreements will be in substantially the same form as the IPO lock-up agreements but with a 90-day duration and a commencement date of October 17, 2023 (the closing date). C&H will prepare the initial draft, with Caldwell, Pearce & Strauss and Whitfield & Garza reviewing on behalf of the underwriters and Selling Stockholders, respectively.
F. Legal Opinions and Negative Assurance
C&H will deliver the following legal opinions and negative assurance letters at closing:
• Issuer's Counsel Opinion: C&H will deliver a legal opinion addressed to the underwriters covering: (i) the valid existence and good standing of PPC under the laws of the State of Delaware; (ii) the due authorization, valid issuance, full payment, and non-assessability of the shares being sold in the Offering; (iii) the due execution and delivery of the underwriting agreement by PPC; and (iv) other customary matters. The opinion will be subject to customary assumptions, qualifications, and exceptions.
• Negative Assurance Letter (10b-5 Letter): C&H will deliver a negative assurance letter (commonly referred to as a "10b-5 letter") addressed to the underwriters, stating that, based on C&H's participation in the preparation of the registration statement and prospectus supplement, nothing has come to C&H's attention that would cause it to believe that the registration statement or the prospectus supplement, at the respective times they became effective or were filed, contained an untrue statement of material fact or omitted to state a material fact necessary in order to make the statements therein not misleading. The negative assurance letter will cover both the base prospectus and the prospectus supplement.
G. Comfort Letters
C&H will coordinate with Graystone & Whitmore LLP regarding the delivery of the following comfort letters:
• Initial Comfort Letter: A comfort letter request was sent by C&H to Graystone on October 3, 2023, requesting delivery of the initial comfort letter in advance of signing. The initial comfort letter will be dated as of the pricing date (October 12, 2023) and will cover the financial statements and selected financial data included in the prospectus supplement, including circle-up procedures, subsequent changes, and capsule information.
• Bring-Down Comfort Letter: A bring-down comfort letter will be delivered by Graystone as of the closing date (October 17, 2023), confirming that the statements in the initial comfort letter remain accurate as of the closing date, subject to any specified changes.
H. Certificates. The following certificates will be delivered at closing:
• Officer's Certificate: Signed by Dr. Marco Castellano (CEO) and Lisa Hargrove (CFO), certifying that the representations and warranties of PPC in the underwriting agreement are true and correct, that PPC has complied with all its obligations under the underwriting agreement, and that no stop order or similar proceeding with respect to the registration statement is pending or threatened.
• Secretary's Certificate: Signed by David Orenstein (General Counsel & Corporate Secretary), certifying as to the incumbency of the officers signing the underwriting agreement and other transaction documents, attaching certified copies of the board resolutions authorizing PPC's cooperation with the Offering, and attaching certified copies of PPC's certificate of incorporation and bylaws.
• Good Standing Certificate: A certificate of good standing for PPC from the Secretary of State of the State of Delaware, dated within five business days of the closing date.
• Selling Stockholder Representation Letter and Closing Certificate: Each Selling Stockholder (or David Orenstein on behalf of each Selling Stockholder pursuant to the Power of Attorney) will deliver a representation letter and closing certificate confirming the accuracy of the Selling Stockholder's representations in the underwriting agreement and compliance with the Selling Stockholder's obligations thereunder.
I. SEC Filings
The following filings with the SEC will be made in connection with the Offering:
• Issuer Free Writing Prospectus / Pricing Term Sheet: A pricing term sheet will be filed as an issuer free writing prospectus pursuant to Rule 433 under the Securities Act on the pricing date (October 12, 2023). The pricing term sheet will set forth the final public offering price, the underwriting discount, the net proceeds to the Selling Stockholders, the number of shares offered, and the Over-Allotment Option terms.
• Form 8-K (Current Report): PPC will file a Current Report on Form 8-K on October 12, 2023 reporting the Company's entry into the underwriting agreement and attaching the underwriting agreement as an exhibit.
• Section 16 Form 4 Filings: Form 4 filings will be required for each of Dr. Elena Castellano, Dr. Riccardo Castellano, and Dr. Marco Castellano, in their capacities as Section 16 reporting persons (directors and/or officers of PPC). The Form 4 filings must be made within two business days of the trade date (October 12, 2023), i.e., by October 16, 2023. C&H will coordinate with PPC's in-house legal team regarding the preparation and filing of the Form 4s.