Dear Ms. Prescott,
I hope this message finds you well. I am writing in your capacity as Chair of the Special Committee of the Board of Directors of Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") to confirm our engagement and to outline the initial steps we intend to undertake in connection with the Special Committee's evaluation of the proposed acquisition of Caliston BioSciences, Inc. ("Caliston").
**1. Engagement Confirmation**
I am pleased to confirm that the engagement letter between Calderwood & Harkness LLP ("C&H") and the Special Committee of Penterra Pharmaceuticals Corp. has been fully executed as of today, June 2, 2023 (C&H Matter No. 1025-00006). A copy of the fully executed engagement letter is attached to this email for your records.
Our firm is honored to serve as independent counsel to the Special Committee in connection with its evaluation of the proposed Caliston acquisition. As you are aware, the Special Committee was formally constituted today by unanimous vote of the six independent directors of Penterra's Board of Directors, with Dr. Marcus Hale, Angela Whitmore, and Raymond Tusk recused from the vote and from all Special Committee proceedings.
**2. Calderwood & Harkness Engagement Team**
We have assembled a dedicated team to support the Special Committee throughout this process. The core members of the engagement team are as follows:
- **Renata Vasquez, Partner** — Responsible Partner. I will serve as the primary point of contact for the Special Committee and will oversee all aspects of the engagement. - **Bernard Crawford, Partner** — Billing Partner. Bernard will handle all billing and administrative matters relating to the engagement. - **Sophie Tremblay, Associate** — Lead Associate. Sophie will manage the day-to-day workstreams, including due diligence coordination, transaction document drafting, and liaison with Caliston's outside counsel, Whitfield Graves LLP. - **Daniel Obi, Associate** — Working Associate. Daniel will assist across all workstreams, including the preparation of meeting minutes, research memoranda, and closing deliverables.
We will bring in additional firm resources as the engagement requires, subject to the Committee's approval. The full team is reachable through our Philadelphia office at 1700 Market Street, Suite 3400, Philadelphia, PA 19103, or through my direct contact information in the signature block below.
**3. Initial Workstreams — Near-Term Priorities**
Set forth below are the key workstreams that C&H intends to undertake in the coming days and weeks. We believe that establishing a rigorous procedural framework at the outset is essential, particularly given the related-party dimensions of this transaction.
**(a) Independence Protocol and Information Barrier**
C&H will prepare and circulate a formal Independence Protocol and Information Barrier Policy for Project Coriander. This protocol will:
- Formalize the exclusion of Dr. Marcus Hale, Angela Whitmore, and Raymond Tusk from all Special Committee deliberations, materials, and communications; - Establish a segregated document management workspace (designated "Project Coriander") with access restricted exclusively to Special Committee members and their authorized advisors; - Set forth protocols governing the routing of all information requests from the Special Committee through Calderwood & Harkness LLP; and - Address procedures for handling inadvertent disclosures or breaches of the information barrier.
We expect to have a draft of this protocol ready for the Committee's review early next week.
**(b) Director Independence Questionnaires**
C&H will prepare and distribute director independence questionnaires to each of the three Special Committee members — Diane Prescott, James Okafor, and Dr. Helen Ng. These questionnaires will evaluate independence under both the New York Stock Exchange listing standards and applicable Delaware law. They will specifically address any relationships, financial or otherwise, with Caliston BioSciences, Dr. Marcus Hale, Angela Whitmore, Ridgeline Ventures, LP, Meridian Life Sciences Fund III, LP, or any other Caliston stockholder, officer, director, or advisor.
We would appreciate prompt completion and return of the questionnaires so that we may finalize a summary memorandum confirming each member's independence for the Committee's records.
**(c) Independent Financial Advisor Selection**
The Special Committee Charter authorizes the Committee to retain an independent financial advisor at the Company's expense. We strongly recommend initiating a process to identify and engage a qualified investment bank to conduct independent valuation analyses and, ultimately, to deliver a fairness opinion in connection with the proposed transaction.
We suggest scheduling brief presentations from two or three candidates for the Committee's consideration. C&H will assist in preparing requests for proposals, evaluating proposed engagement terms, and confirming the financial advisor's independence from Dr. Hale, Caliston, and their respective affiliates. We are prepared to begin this process immediately upon the Committee's authorization.
**(d) Delaware Law Analysis — Interested Director Transactions**
C&H will prepare a comprehensive memorandum analyzing the legal framework governing interested director transactions under Delaware law. This memorandum will address, among other things:
- Section 144 of the Delaware General Corporation Law; - The entire fairness doctrine, including its two components — fair dealing and fair price; - The framework established in *Kahn v. M&F Worldwide Corp.* (MFW) and its progeny regarding the procedural safeguards necessary to shift the standard of judicial review from entire fairness to business judgment; and - The specific conflict dynamics presented by this transaction, including Dr. Hale's 28.5% equity interest in Caliston (acquired through approximately $42 million in personal investment across Caliston's Seed, Series A, and Series B financing rounds), his role as a board observer at Caliston since 2018, and the spousal relationship between Angela Whitmore and Dr. Evan Whitmore, who serves as Caliston's Head of Clinical Development and a member of Caliston's board of directors.
The memorandum will provide our recommendations regarding the procedural safeguards the Special Committee should implement to establish the most protective standard of judicial review. We expect to have this memorandum ready for the Committee's review within the next week.
**(e) Coordination with Penterra's Regular Outside Counsel**
As you know, Alcott, Barringer & Cole LLP ("ABC"), and specifically Victoria Shen, has been recused from advising the Special Committee in order to preserve the Committee's independence. C&H will send a letter to Ms. Shen establishing a formal coordination protocol between Penterra's regular outside counsel and independent counsel. This protocol will delineate information barrier boundaries and identify the limited categories of non-conflicted corporate matters on which communication between ABC and the Special Committee or its advisors may be permitted.
**4. Conflicts Clearance**
I can confirm that C&H completed a thorough internal conflicts check prior to accepting this engagement. The firm has no existing client relationships with Caliston BioSciences, Inc., Whitfield Graves LLP, Fendowell Sinclair & Co., Ridgeline Ventures, LP, Meridian Life Sciences Fund III, LP, Dr. Marcus Hale individually, or any other Caliston stockholder, officer, director, or advisor that would create a conflict of interest. A formal conflicts clearance memorandum has been prepared and is on file at the firm. We are happy to provide a copy to the Committee upon request.
**5. Organizational Meeting — Scheduling**
We propose holding the organizational meeting of the Special Committee at the Committee's earliest convenience — ideally later today, June 2, if schedules permit. The proposed agenda for the organizational meeting includes the following items:
1. Formal appointment of Diane Prescott as Chair of the Special Committee; 2. Confirmation of the engagement of Calderwood & Harkness LLP as independent counsel; 3. Adoption of the Special Committee Charter; 4. Discussion and adoption of the Independence Protocol and Information Barrier Policy (or authorization to proceed with finalization); 5. Authorization to proceed with identifying and engaging an independent financial advisor.
Sophie Tremblay and I will attend the meeting on behalf of C&H, and Daniel Obi will prepare the minutes. Could you kindly confirm your availability and coordinate with James Okafor and Dr. Helen Ng? We are flexible and can accommodate the Committee's schedules.
**6. Fee Arrangement**
For the record, I wish to briefly recap the agreed fee structure as set forth in the executed engagement letter:
- **Hourly Rates:** Blended rates of $1,025 per hour for partners and $625 per hour for associates; - **Invoicing:** Monthly billing cycle; - **Retainer:** $75,000 evergreen retainer, to be replenished as drawn; and - **Fee Cap:** No fee cap has been imposed, consistent with the Board's resolution authorizing the Special Committee to incur legal fees and expenses as reasonably necessary in connection with its evaluation of the proposed transaction.
**7. Closing**
We are deeply committed to ensuring that the Special Committee's process is thorough, well-documented, and defensible at every stage. Given the related-party nature of this transaction, building a strong contemporaneous record will be of paramount importance, and we intend to guide the Committee accordingly.
I very much look forward to working with you and with the full Committee in the weeks ahead. Please do not hesitate to reach out with any questions, concerns, or preliminary thoughts. We are at your disposal.
Warm regards,
**Renata Vasquez** Partner Calderwood & Harkness LLP 1700 Market Street, Suite 3400 Philadelphia, PA 19103 Direct: (215) 555-4812 Email: rvasquez@calderwoodharkness.com
**Attachment:** Fully Executed Engagement Letter (C&H Matter No. 1025-00006)
*Note: The draft Special Committee Charter will follow under separate cover.*
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