STOCKHOLDER REPRESENTATIVE AGREEMENT

STOCKHOLDER REPRESENTATIVE AGREEMENT
Dated as of November 27, 2023
by and among
PENTERRA PHARMACEUTICALS CORP.
and
RIDGELINE VENTURES, LP
(as Stockholder Representative)
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STOCKHOLDER REPRESENTATIVE AGREEMENT
This STOCKHOLDER REPRESENTATIVE AGREEMENT (this "Agreement") is entered into as of November 27, 2023 (the "Effective Date"), by and among:
(i) Penterra Pharmaceuticals Corp., a Delaware corporation ("Buyer" or "Penterra"), with its principal office located at 400 Innovation Drive, Suite 1200, Princeton, New Jersey 08540; and
(ii) Ridgeline Ventures, LP, a Delaware limited partnership ("Stockholder Representative" or "Representative"), acting through its authorized signatory, Ava Lindström, Managing Partner, with its principal office located at 1455 Sand Hill Road, Suite 200, Menlo Park, California 94025.
Each of Penterra and the Representative is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
This Agreement is entered into in connection with that certain Agreement and Plan of Merger, dated as of November 27, 2023 (as may be amended, supplemented, or otherwise modified from time to time, the "Merger Agreement"), by and between Penterra Pharmaceuticals Corp. and Caliston BioSciences, Inc., a Delaware corporation ("Caliston" or the "Company"), with its principal office located at 88 Harbor Point Road, Cambridge, Massachusetts 02142, pursuant to which Caliston will merge with and into Penterra (the "Merger"), with Penterra surviving the Merger.
RECITALS
WHEREAS, the Merger Agreement provides for the merger of Caliston BioSciences, Inc. with and into Penterra Pharmaceuticals Corp. (the "Merger"), pursuant to which the former holders of capital stock of Caliston immediately prior to the Effective Time (as defined in the Merger Agreement) (collectively, the "Former Stockholders") will receive aggregate merger consideration of Nine Hundred Twenty-Five Million Dollars ($925,000,000) in equity value (approximately seventy-five percent (75%) in cash and approximately twenty-five percent (25%) in shares of Penterra common stock, par value $0.001 per share), plus contingent value rights of up to One Hundred Twenty-Five Million Dollars ($125,000,000), for a maximum aggregate transaction value of One Billion Fifty Million Dollars ($1,050,000,000);
WHEREAS, the Merger Agreement requires that the Former Stockholders appoint a stockholder representative to act on their behalf with respect to certain post-closing matters arising under or in connection with the Merger Agreement, including, without limitation, the resolution of indemnification claims, administration of escrow disbursements, matters relating to the Contingent Value Rights Agreement (as defined below), and post-closing purchase price adjustments;
WHEREAS, Ridgeline Ventures, LP, a holder of approximately twenty-two and three-tenths percent (22.3%) of the outstanding equity of Caliston immediately prior to the Effective Time, and the lead investor in the Company's Series C preferred stock financing, has been designated and has agreed to serve as the Stockholder Representative on the terms and subject to the conditions set forth herein;
WHEREAS, the Former Stockholders of Caliston approved the Merger and the designation of Ridgeline Ventures, LP as Stockholder Representative by written consent of holders of sixty-nine and five-tenths percent (69.5%) of the outstanding shares of Caliston, executed on or about December 1, 2023 (or, as of the date hereof, will approve promptly following execution of the Merger Agreement), representing the requisite vote under the Company's Amended and Restated Certificate of Incorporation;
WHEREAS, in connection with the Merger, Penterra, the Stockholder Representative, and Greystone National Bank, N.A., a national banking association (in its capacity as escrow agent, the "Escrow Agent"), have entered into that certain Escrow Agreement, dated as of November 27, 2023 (as may be amended, supplemented, or otherwise modified from time to time, the "Escrow Agreement"), establishing an escrow fund in the amount of Forty-Six Million Two Hundred Fifty Thousand Dollars ($46,250,000) (representing five percent (5%) of the aggregate equity value of the Merger Consideration) with an eighteen (18)-month survival period for indemnification claims; and
WHEREAS, in connection with the Merger, Penterra and Columnar Trust Services, Inc. (in its capacity as CVR trustee, the "CVR Trustee") have entered into that certain Contingent Value Rights Agreement, dated as of November 27, 2023 (as may be amended, supplemented, or otherwise modified from time to time, the "CVR Agreement"), providing for the payment of up to One Hundred Twenty-Five Million Dollars ($125,000,000) to the Former Stockholders, contingent upon the approval by the U.S. Food and Drug Administration (the "FDA") of the Company's CLT-4019 compound on or before December 31, 2026.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth 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" has the meaning set forth in the Preamble.
"Buyer" means Penterra Pharmaceuticals Corp., a Delaware corporation, and its successors and permitted assigns.
"Caliston" or "Company" means Caliston BioSciences, Inc., a Delaware corporation, with its principal office located at 88 Harbor Point Road, Cambridge, Massachusetts 02142.
"Closing" has the meaning ascribed to such term in the Merger Agreement.
"Closing Date" has the meaning ascribed to such term in the Merger Agreement.
"Company Termination Fee" means Twenty-Seven Million Seven Hundred Fifty Thousand Dollars ($27,750,000), representing three percent (3.0%) of the aggregate equity value of the Merger Consideration, payable in the circumstances and in the manner set forth in the Merger Agreement.
"CVR Agreement" means that certain Contingent Value Rights Agreement, dated as of November 27, 2023, by and between Penterra Pharmaceuticals Corp. and Columnar Trust Services, Inc., as CVR Trustee, as may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"CVR Milestone" means the approval by the FDA of CLT-4019 (IND 158429), whether through a New Drug Application, a Biologics License Application, or any other applicable regulatory pathway, on or before December 31, 2026.
"CVR Payment" means One Hundred Twenty-Five Million Dollars ($125,000,000), payable to the Former Stockholders upon the achievement of the CVR Milestone in accordance with and subject to the terms and conditions of the CVR Agreement.
"CVR Trustee" means Columnar Trust Services, Inc., in its capacity as trustee under the CVR Agreement, or any successor trustee appointed in accordance with the terms of the CVR Agreement.
"Effective Time" has the meaning ascribed to such term in the Merger Agreement.
"Escrow Agent" means Greystone National Bank, N.A., a national banking association, in its capacity as escrow agent under the Escrow Agreement, or any successor escrow agent appointed in accordance with the terms of the Escrow Agreement.
"Escrow Agreement" means that certain Escrow Agreement, dated as of November 27, 2023, by and among Penterra Pharmaceuticals Corp., the Stockholder Representative, and Greystone National Bank, N.A., as Escrow Agent, as may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Escrow Fund" means the aggregate amount of Forty-Six Million Two Hundred Fifty Thousand Dollars ($46,250,000) deposited with the Escrow Agent pursuant to the Escrow Agreement, together with any interest, dividends, or other income earned thereon.
"Escrow Period" means the period commencing on the Closing Date and ending on the date that is eighteen (18) months following the Closing Date, unless extended with respect to any pending and unresolved indemnification claims in accordance with the terms of the Escrow Agreement.
"Expense Reserve" means the amount of One Million Five Hundred Thousand Dollars ($1,500,000) withheld from the Merger Consideration and deposited in a segregated account maintained by or on behalf of the Representative, as more fully described in Article V of this Agreement.
"Former Stockholders" means the former holders of capital stock of Caliston immediately prior to the Effective Time who are entitled to receive a portion of the Merger Consideration, the CVR Payment, or any other amounts payable in connection with the Merger, including, without limitation, Dr. Marcus Hale (holding approximately 28.5% of the outstanding equity of Caliston immediately prior to the Effective Time), Ridgeline Ventures, LP (holding approximately 22.3%), Meridian Life Sciences Fund III, LP (holding approximately 18.7%), Dr. Nadia Sorensen (holding approximately 14.2%), Dr. Raj Malhotra (holding approximately 9.8%), and other management and employee holders (holding approximately 6.5% in the aggregate), as more fully set forth on Exhibit B attached hereto.
"Indemnified Representative Party" has the meaning set forth in Section 7.1.
"Merger" has the meaning set forth in the Recitals.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of November 27, 2023 (C&H Draft v.7.3, execution version), by and between Penterra Pharmaceuticals Corp. and Caliston BioSciences, Inc., as may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Merger Consideration" means the aggregate merger consideration of Nine Hundred Twenty-Five Million Dollars ($925,000,000) in equity value payable to the Former Stockholders pursuant to the Merger Agreement, consisting of (a) Six Hundred Ninety-Three Million Seven Hundred Fifty Thousand Dollars ($693,750,000) in cash and (b) Two Hundred Thirty-One Million Two Hundred Fifty Thousand Dollars ($231,250,000) in shares of Penterra common stock, par value $0.001 per share (based on the thirty (30)-day volume-weighted average price of $39.17 per share, yielding an aggregate of 5,903,497 shares of Penterra common stock).
"Party" and "Parties" have the meanings set forth in the Preamble.
"Pro Rata Share" means, with respect to each Former Stockholder, such Former Stockholder's percentage interest in the outstanding capital stock of Caliston immediately prior to the Effective Time, as set forth on Exhibit B attached hereto, expressed as a percentage of the aggregate equity interests of all Former Stockholders. For purposes of this Agreement, the Pro Rata Share of each Former Stockholder shall be used to determine such Former Stockholder's share of (a) distributions from the Escrow Fund, (b) allocations of the Expense Reserve, (c) the CVR Payment, (d) indemnification obligations, and (e) any other amounts distributable to or assessable against the Former Stockholders pursuant to this Agreement or the Transaction Documents.
"Representative" or "Stockholder Representative" means Ridgeline Ventures, LP, a Delaware limited partnership, or any successor representative appointed in accordance with Article VIII of this Agreement.
"Reverse Termination Fee" means Thirty-Two Million Three Hundred Seventy-Five Thousand Dollars ($32,375,000), representing three and one-half percent (3.5%) of the aggregate equity value of the Merger Consideration, payable in the circumstances and in the manner set forth in the Merger Agreement.
"Transaction Documents" means, collectively, this Agreement, the Merger Agreement, the Escrow Agreement, the CVR Agreement, and all other agreements, instruments, certificates, and documents executed and delivered in connection with the Merger.
Section 1.2 Interpretation and Cross-References
(a) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement.
(b) Unless the context otherwise requires: (i) the headings, captions, and titles of the articles, sections, and subsections of this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement; (ii) words importing the singular shall include the plural, and vice versa; (iii) words importing any gender shall include all other genders; (iv) the term "including" (and all variations thereof) means "including, without limitation"; (v) the terms "herein," "hereof," "hereto," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular article, section, subsection, paragraph, or clause; (vi) references to any statute, rule, or regulation are to such statute, rule, or regulation as amended, modified, supplemented, or replaced from time to time (and, in the case of any statute, includes any rules and regulations promulgated under such statute), unless the context otherwise requires; (vii) references to any agreement or document are to such agreement or document as amended, modified, supplemented, or replaced from time to time, unless otherwise expressly provided; and (viii) references to any Person include such Person's successors and permitted assigns.
(c) The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event of any ambiguity or question of intent or interpretation arising under this Agreement, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.
ARTICLE II — APPOINTMENT AND ACCEPTANCE
Section 2.1 Appointment of Stockholder Representative
(a) Effective as of the Closing, each of the Former Stockholders hereby irrevocably constitutes and appoints Ridgeline Ventures, LP as such Former Stockholder's true and lawful agent, attorney-in-fact, and representative, with full power of substitution and resubstitution, and with full power and authority to act on behalf of, and in the name, place, and stead of, each and all of the Former Stockholders, in connection with all post-closing matters arising under or in connection with the Merger Agreement, the Escrow Agreement, the CVR Agreement, and this Agreement, in each case to the extent and in the manner set forth in this Agreement.
(b) The appointment of the Representative hereunder is coupled with an interest and is irrevocable. Such appointment shall not be affected by the death, incapacity, bankruptcy, dissolution, or liquidation of any Former Stockholder. No Former Stockholder shall have any right to revoke, modify, or terminate the Representative's appointment hereunder, except through the removal process set forth in Section 8.2 of this Agreement.
(c) The authorized signatory of the Representative for all purposes under this Agreement and the Transaction Documents shall be Ava Lindström, Managing Partner of Ridgeline Ventures, LP, or such other individual as the Representative may designate from time to time by written notice to Penterra in accordance with Article IX.
Section 2.2 Acceptance
(a) Ridgeline Ventures, LP hereby accepts the appointment as Stockholder Representative and agrees to perform the duties and exercise the powers conferred upon it by this Agreement, in each case subject to and in accordance with the terms and conditions of this Agreement.
(b) Notwithstanding anything to the contrary contained herein, the Representative shall have no obligation to take any action or perform any duty except as expressly set forth in this Agreement. The Representative shall not be deemed to have any fiduciary duty to any Former Stockholder or any other Person, except to the extent expressly set forth herein. The grant of authority hereunder to the Representative is intended solely to facilitate the administration of the post-closing matters contemplated by the Transaction Documents and shall not be construed to create a trust, partnership, joint venture, or other association of any kind between or among the Representative and the Former Stockholders.
Section 2.3 Binding Effect on Former Stockholders
(a) All actions taken by the Representative within the scope of the authority granted herein, and all decisions, determinations, elections, consents, waivers, agreements, compromises, settlements, and other actions of the Representative made or taken in accordance with this Agreement, shall be binding on each and all of the Former Stockholders as if taken by such Former Stockholders personally, and no Former Stockholder shall have the right to object to, contest, challenge, or otherwise dispute any action taken or omitted by the Representative in good faith in the exercise of the authority granted hereunder.
(b) Each of Penterra, Greystone National Bank, N.A. (in its capacity as Escrow Agent), and Columnar Trust Services, Inc. (in its capacity as CVR Trustee) shall be entitled to rely conclusively and without inquiry on the authority of the Representative as set forth herein and on the genuineness of any signature, document, notice, instruction, or communication delivered by the Representative in connection with the Transaction Documents. None of Penterra, the Escrow Agent, or the CVR Trustee shall have any obligation to inquire into the authority of the Representative to act on behalf of the Former Stockholders, and none of Penterra, the Escrow Agent, or the CVR Trustee shall have any liability to any Former Stockholder for any action taken or omitted in reliance upon the Representative's instructions or authority.
(c) Each Former Stockholder, by executing and delivering the acknowledgment in the form attached hereto as Exhibit A, or by accepting any portion of the Merger Consideration, shall be deemed to have consented to the terms of this Agreement and to the appointment of the Representative on the terms and subject to the conditions set forth herein.
ARTICLE III — POWERS AND AUTHORITY OF THE REPRESENTATIVE
Section 3.1 Indemnification Claims
The Representative shall have full power and authority, acting on behalf of the Former Stockholders, to:
(a) receive, review, evaluate, and respond to any claim for indemnification or other claim made by Penterra or any Buyer Indemnified Party (as defined in the Merger Agreement) pursuant to Article IX of the Merger Agreement or otherwise under the Transaction Documents, including any claim notice, officer's certificate, or demand for payment delivered to the Representative by or on behalf of Penterra;
(b) negotiate, dispute, compromise, settle, or consent to the payment of any indemnification claim or other claim asserted by or on behalf of Penterra or any Buyer Indemnified Party, on such terms and conditions as the Representative deems appropriate in its sole discretion, and to execute and deliver on behalf of the Former Stockholders any release, settlement agreement, or other document in connection therewith;
(c) engage legal counsel, including Whitfield Graves LLP (Kenneth Pratt, Lead Partner), or such other legal counsel as the Representative may select in its discretion, and other advisors, consultants, and experts, in connection with the review, evaluation, negotiation, dispute, defense, or settlement of any indemnification claim or related matter, with the fees and expenses of such counsel and advisors to be paid from the Expense Reserve;
(d) authorize or direct the Escrow Agent to make disbursements from the Escrow Fund in satisfaction or partial satisfaction of indemnification claims that have been resolved, settled, or otherwise determined to be payable in accordance with the terms of the Merger Agreement and the Escrow Agreement; and
(e) take any and all other actions that the Representative deems necessary, appropriate, or desirable in connection with the foregoing, including the conduct of any investigation, discovery, or audit related to any indemnification claim.
Section 3.2 Escrow Administration
The Representative shall have full power and authority, acting on behalf of the Former Stockholders, to:
(a) act as the counterparty to Penterra under the Escrow Agreement and to exercise all rights and perform all obligations of the "Stockholder Representative" thereunder;
(b) deliver joint written instructions to Greystone National Bank, N.A. (as Escrow Agent) regarding the release, disbursement, distribution, or retention of funds held in the Escrow Fund, including in connection with the satisfaction of resolved indemnification claims, the release of funds upon expiration of the Escrow Period, or any other disbursement contemplated by the Escrow Agreement;
(c) object to any claimed disbursement or release of funds from the Forty-Six Million Two Hundred Fifty Thousand Dollar ($46,250,000) Escrow Fund requested by Penterra, and to deliver counter-notices, objection notices, and dispute notices to the Escrow Agent in accordance with the procedures set forth in the Escrow Agreement;
(d) direct the Escrow Agent to distribute the remaining balance of the Escrow Fund (or any portion thereof) to the Former Stockholders upon the expiration of the eighteen (18)-month Escrow Period, in accordance with each Former Stockholder's Pro Rata Share, subject to any pending and unresolved indemnification claims for which a holdback or reserve may be maintained in accordance with the Escrow Agreement; and
(e) negotiate, execute, and deliver any amendment, modification, supplement, or waiver of the Escrow Agreement on behalf of the Former Stockholders, or consent to the appointment of a successor escrow agent, in each case to the extent consistent with the Representative's duties hereunder.
Section 3.3 CVR Administration
The Representative shall have full power and authority, acting on behalf of the Former Stockholders, to:
(a) act on behalf of the Former Stockholders in connection with all matters arising under or in connection with the CVR Agreement, and to exercise all rights and remedies of the Former Stockholders (or the holders of contingent value rights) thereunder;
(b) communicate with Columnar Trust Services, Inc. (as CVR Trustee) and Penterra regarding the progress toward achievement of the CVR Milestone, including the status of the clinical development, regulatory review, and approval process for CLT-4019 (IND 158429), and to request and receive information, updates, reports, and certifications from Penterra regarding Penterra's compliance with any diligent efforts obligations or commercialization covenants set forth in the CVR Agreement;
(c) enforce the rights of the Former Stockholders under the CVR Agreement, including the right to receive the CVR Payment of One Hundred Twenty-Five Million Dollars ($125,000,000) upon FDA approval of CLT-4019 on or before December 31, 2026, and to take all actions necessary or advisable to protect, preserve, or enforce such rights, including the initiation of legal proceedings or arbitration against Penterra or any other Person;
(d) negotiate, mediate, arbitrate, or otherwise resolve any disputes regarding the achievement or non-achievement of the CVR Milestone, the compliance by Penterra with its diligent efforts covenants, the calculation or payment of the CVR Payment, or any other matter arising under the CVR Agreement; and
(e) consent to or approve any amendment, modification, supplement, or waiver of the CVR Agreement on behalf of the Former Stockholders, subject to the limitations set forth in this Agreement.
Section 3.4 Post-Closing Purchase Price Adjustments
The Representative shall have full power and authority, acting on behalf of the Former Stockholders, to:
(a) participate in and resolve any post-closing working capital adjustment, net cash adjustment, net debt adjustment, or any other purchase price adjustment contemplated by the Merger Agreement, including the review and evaluation of Penterra's closing date balance sheet, working capital statement, and related calculations;
(b) engage independent accountants, financial advisors, or other professionals (at the expense of the Expense Reserve) to review, audit, or verify Penterra's closing date calculations and to prepare any response, objection notice, or counter-calculation on behalf of the Former Stockholders;
(c) agree to, accept, or dispute any proposed purchase price adjustment, and to negotiate, compromise, or settle any dispute with Penterra regarding such adjustments, including, if necessary, the submission of any disputed items to the independent accounting firm designated in the Merger Agreement for resolution; and
(d) receive or make any payment required in connection with any purchase price adjustment on behalf of the Former Stockholders.
Section 3.5 Tax Matters
The Representative shall have full power and authority, acting on behalf of the Former Stockholders, to:
(a) act on behalf of the Former Stockholders with respect to any and all tax matters relating to Caliston or the Company for any pre-closing tax period or any straddle period, including any tax matters arising under the Merger Agreement;
(b) review and consent to (or object to) any federal, state, local, or foreign tax return, amended tax return, or other tax filing of or with respect to Caliston or the Company for any pre-closing tax period or any straddle period, to the extent such review or consent right is provided for in the Merger Agreement;
(c) handle, manage, control, and resolve any tax audit, examination, contest, assessment, deficiency notice, claim for refund, or other proceeding relating to taxes of Caliston or the Company for any pre-closing tax period or any straddle period, including the authority to negotiate, compromise, settle, or litigate any such matter on behalf of the Former Stockholders; and
(d) make or revoke any tax election, give any consent, or take any other action on behalf of the Former Stockholders with respect to any pre-closing tax matter, in each case to the extent permitted or required under the Merger Agreement.
Section 3.6 General Authority
In addition to and without limiting the specific powers set forth in Sections 3.1 through 3.5, the Representative shall have the following general authority, acting on behalf of the Former Stockholders:
(a) to execute and deliver any and all agreements, certificates, instruments, receipts, acknowledgments, releases, settlement agreements, or other documents on behalf of the Former Stockholders as may be necessary, appropriate, or desirable in connection with the post-closing matters contemplated by the Transaction Documents;
(b) to initiate, prosecute, defend, intervene in, settle, compromise, or otherwise resolve any litigation, arbitration, mediation, or other dispute resolution proceeding on behalf of the Former Stockholders related to or arising out of the Merger Agreement, the Escrow Agreement, the CVR Agreement, this Agreement, or any other Transaction Document;
(c) to make all elections, give all consents, waivers, approvals, and authorizations, and take all other actions that are permitted or required of the Former Stockholders under the Transaction Documents;
(d) to receive all notices, demands, claims, requests for information, and other communications on behalf of the Former Stockholders from Penterra, the Escrow Agent, the CVR Trustee, or any other Person in connection with the Transaction Documents;
(e) to provide all notices, responses, objections, instructions, and other communications on behalf of the Former Stockholders to Penterra, the Escrow Agent, the CVR Trustee, or any other Person in connection with the Transaction Documents;
(f) to establish and maintain one or more bank accounts in the name of the Representative (or in the name of the Former Stockholders, with the Representative as signatory) for the receipt, holding, and disbursement of funds in connection with the Expense Reserve, distributions from the Escrow Fund, the CVR Payment, purchase price adjustment amounts, and any other amounts payable to or distributable among the Former Stockholders; and
(g) to take any and all other actions that the Representative deems necessary, appropriate, or desirable to carry out its duties and exercise its authority under this Agreement and the Transaction Documents.
All notices to the Representative shall be delivered to the following address (or such other address as the Representative may designate from time to time by written notice in accordance with Article IX):
Ridgeline Ventures, LP 1455 Sand Hill Road, Suite 200 Menlo Park, California 94025
Attention: Ava Lindström, Managing Partner
Email: a.lindstrom@ridgelineventures.com
ARTICLE IV — LIMITATIONS ON AUTHORITY
Section 4.1 Scope Limitations
(a) Notwithstanding anything to the contrary contained in this Agreement, the authority of the Representative is limited strictly to post-closing matters arising under or in connection with the Merger Agreement, the Escrow Agreement, the CVR Agreement, and this Agreement. The Representative shall have no authority to act on behalf of, or to bind, any Former Stockholder with respect to any matter that is not directly related to the transactions contemplated by the Transaction Documents or the post-closing rights, obligations, and interests of the Former Stockholders arising thereunder.
(b) The Representative shall have no authority to increase the liability of any Former Stockholder beyond such Former Stockholder's Pro Rata Share of the Escrow Fund, except in the case of fraud by such Former Stockholder. Without limiting the generality of the foregoing, the Representative shall not have the authority to commit any Former Stockholder to any indemnification obligation, contribution obligation, or other financial obligation in excess of such Former Stockholder's Pro Rata Share of the Escrow Fund, unless such Former Stockholder has expressly consented in writing to such additional obligation.
(c) Nothing in this Agreement shall be construed to authorize the Representative to (i) amend, modify, or waive any provision of the Merger Agreement or any other Transaction Document to the extent that such amendment, modification, or waiver would materially and adversely affect the rights or increase the obligations of the Former Stockholders (other than as contemplated herein), without the prior written consent of Former Stockholders holding more than fifty percent (50%) of the aggregate Pro Rata Shares, or (ii) take any action that is expressly prohibited by the terms of the Merger Agreement, the Escrow Agreement, the CVR Agreement, or applicable law.
Section 4.2 Standard of Care
(a) The Representative shall act in good faith in the performance of its duties and the exercise of its powers under this Agreement. The Representative shall not be liable to any Former Stockholder for any action taken, or any omission to act, in good faith, including any action taken or omitted in reliance upon the advice of legal counsel, accountants, financial advisors, or other professionals retained by the Representative in connection with the performance of its duties.
(b) The Representative shall not be required to take any action under this Agreement that would require the expenditure of funds by the Representative in excess of the then-available balance of the Expense Reserve, unless one or more of the Former Stockholders shall have provided additional funds sufficient to cover such expenditure. Without limiting the foregoing, the Representative shall have the right, but not the obligation, to refrain from taking any action or exercising any right under this Agreement if the Representative determines in good faith that the Expense Reserve is or would be insufficient to cover the costs and expenses that would reasonably be expected to be incurred in connection with such action.
(c) Nothing in this Agreement shall be construed to require the Representative to incur any personal liability, or to risk or expend its own funds, in the performance of its duties hereunder. The Representative shall at all times be entitled to first receive satisfactory assurance of indemnification and expense reimbursement before taking any action that may expose the Representative to liability or expense.
ARTICLE V — EXPENSE RESERVE
Section 5.1 Establishment of Expense Reserve
(a) At the Closing, a portion of the Merger Consideration otherwise distributable to the Former Stockholders in the aggregate amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Expense Reserve") shall be withheld from the Former Stockholders' respective portions of the Merger Consideration and deposited in a segregated interest-bearing account maintained by or on behalf of the Representative at a nationally recognized financial institution selected by the Representative.
(b) The Expense Reserve shall be funded pro rata from each Former Stockholder's portion of the Merger Consideration in accordance with such Former Stockholder's Pro Rata Share, as set forth on Exhibit B attached hereto. The amount withheld from each Former Stockholder's Merger Consideration shall be equal to the product of (i) One Million Five Hundred Thousand Dollars ($1,500,000) multiplied by (ii) such Former Stockholder's Pro Rata Share.
(c) The Expense Reserve (including any interest or other income earned thereon) shall be held by the Representative and administered in accordance with the terms of this Article V.
Section 5.2 Permitted Uses
(a) The Representative shall be entitled to use the Expense Reserve to pay or reimburse the following costs, fees, and expenses incurred by the Representative in connection with the performance of its duties and the exercise of its authority under this Agreement and the Transaction Documents:
(i) legal fees and expenses incurred by the Representative in connection with the review, evaluation, negotiation, dispute, defense, or settlement of any indemnification claim, escrow matter, CVR matter, tax matter, purchase price adjustment, or any other post-closing matter arising under or in connection with the Transaction Documents, including fees and expenses of Whitfield Graves LLP or such other legal counsel as may be engaged by the Representative;
(ii) accounting, financial advisory, valuation, and other professional fees and expenses incurred by the Representative in connection with the review or audit of closing date calculations, working capital adjustments, tax matters, or any other matter requiring professional expertise;
(iii) costs of any litigation, arbitration, mediation, or other dispute resolution proceeding initiated, prosecuted, or defended by the Representative on behalf of the Former Stockholders, including court costs, filing fees, expert witness fees, deposition costs, and related expenses;
(iv) reasonable out-of-pocket travel, communication, copying, mailing, and other administrative expenses incurred by the Representative in connection with the performance of its duties; and
(v) any other reasonable out-of-pocket costs and expenses incurred by the Representative in the performance of its duties or the exercise of its authority under this Agreement and the Transaction Documents.
(b) The Representative shall maintain reasonable records of all expenditures from the Expense Reserve, including the date, amount, payee, and nature of each expenditure, and shall make such records available for inspection by any Former Stockholder upon reasonable request and at such Former Stockholder's expense.
Section 5.3 Distribution of Remaining Balance
Upon the later to occur of (a) the expiration of the eighteen (18)-month Escrow Period and the release of all remaining funds held in the Escrow Fund to the Former Stockholders (or the final resolution of all pending and unresolved indemnification claims, if any claims remain pending at the expiration of the Escrow Period), (b) the final resolution of all pending indemnification claims, escrow disbursements, purchase price adjustments, tax matters, and other post-closing matters under the Transaction Documents, and (c) the earlier of (i) the achievement or definitive non-achievement of the CVR Milestone and the payment or non-payment of the CVR Payment and (ii) December 31, 2026, the Representative shall, within thirty (30) days following such date, distribute any remaining balance of the Expense Reserve (including any interest or other income earned thereon, net of any accrued but unpaid expenses and any amounts reserved by the Representative in good faith for anticipated expenses) to the Former Stockholders in accordance with their respective Pro Rata Shares.
Section 5.4 Additional Funding
(a) If the Representative determines in good faith that the Expense Reserve is or will be insufficient to cover the costs and expenses that are or may reasonably be expected to be incurred by the Representative in connection with the performance of its duties and the exercise of its authority under this Agreement and the Transaction Documents, the Representative may deliver written notice to each Former Stockholder requesting additional contributions to the Expense Reserve on a pro rata basis in accordance with each Former Stockholder's Pro Rata Share, which notice shall specify the aggregate amount requested and the basis for such request.
(b) No Former Stockholder shall be obligated to make any additional contribution to the Expense Reserve pursuant to this Section 5.4; provided, however, that the Representative shall not be required to take any action under this Agreement that would require the expenditure of funds in excess of the then-available balance of the Expense Reserve unless and until such additional funds have been provided by one or more of the Former Stockholders. Any Former Stockholder who provides additional funds in excess of its Pro Rata Share shall be entitled to reimbursement from the other Former Stockholders on a pro rata basis to the extent funds are subsequently available from the Expense Reserve or other distributions to the Former Stockholders.
ARTICLE VI — EXCULPATION OF THE REPRESENTATIVE
Section 6.1 No Liability for Good Faith Actions
(a) The Representative shall not be liable to any Former Stockholder, or to any other Person, for any action taken, or any omission to act, in good faith in the performance of its duties or the exercise of its authority under this Agreement or the Transaction Documents, including, without limitation, any action taken or omitted upon the advice of legal counsel, accountants, financial advisors, or other professionals retained by the Representative in connection with the performance of its duties.
(b) Without limiting the generality of the foregoing, the Representative shall not be liable for any errors in judgment, negligence, or any act or omission that does not constitute willful misconduct, gross negligence, or fraud on the part of the Representative. In no event shall the Representative be liable for any consequential, incidental, indirect, special, punitive, or exemplary damages, lost profits, or diminution in value, regardless of whether such damages are based on contract, tort, strict liability, or any other theory, and regardless of whether the Representative was advised of the possibility of such damages.
Section 6.2 Reliance
(a) The Representative shall be entitled to rely, and shall be fully protected in relying, on any document, notice, instruction, direction, communication, resolution, certification, affidavit, letter, facsimile, email, or other instrument or communication believed by the Representative in good faith to be genuine and correct and to have been signed, sent, or delivered by the appropriate party or parties.
(b) The Representative may rely on the advice of legal counsel (including Whitfield Graves LLP, Kenneth Pratt, Lead Partner, or other legal counsel selected by the Representative), accountants, financial advisors, and other professionals retained by the Representative in connection with the performance of its duties, and shall not be liable for any action taken or omitted in reliance upon such advice. The fees and expenses of such counsel and advisors shall be payable from the Expense Reserve.
(c) The Representative may rely upon any notice, communication, or other document delivered by Penterra, the Escrow Agent, the CVR Trustee, or any Former Stockholder without independent investigation or verification, and shall not be liable for any action taken or omitted in reliance thereon.
Section 6.3 No Duty to Investigate
The Representative shall not be required to independently verify, investigate, audit, or confirm the accuracy, completeness, or authenticity of any information, statement, representation, warranty, certificate, notice, or other communication provided to the Representative by Penterra, the Escrow Agent, the CVR Trustee, any Former Stockholder, or any other Person. The Representative shall have no duty to make any inquiry or investigation into the facts or circumstances underlying any indemnification claim, escrow matter, CVR matter, tax matter, purchase price adjustment, or other post-closing matter, except to the extent that the Representative, in its sole discretion, determines that such inquiry or investigation is necessary or advisable to fulfill its duties hereunder.
ARTICLE VII — INDEMNIFICATION OF THE REPRESENTATIVE
Section 7.1 Indemnification by Former Stockholders
(a) Each of the Former Stockholders, severally (and not jointly) in accordance with its respective Pro Rata Share, shall indemnify, defend, and hold harmless the Representative and its partners, members, managers, officers, directors, employees, agents, advisors, and representatives (each, an "Indemnified Representative Party") from and against any and all losses, liabilities, damages, claims, demands, judgments, penalties, fines, costs, and expenses (including reasonable attorneys' fees, court costs, and expenses of investigation and litigation) (collectively, "Representative Losses") that any Indemnified Representative Party may suffer, incur, or become subject to, arising out of, relating to, or in connection with the Representative's acceptance of its appointment hereunder or the performance or non-performance of its duties, or the exercise of its authority, under this Agreement, the Merger Agreement, the Escrow Agreement, the CVR Agreement, or any other Transaction Document, including, without limitation:
(i) any action taken or omitted by the Representative in good faith in connection with the review, evaluation, negotiation, dispute, defense, or settlement of any indemnification claim;
(ii) any action taken or omitted by the Representative in good faith in connection with the administration of the Escrow Fund or the CVR Agreement;
(iii) any action taken or omitted by the Representative in good faith in connection with any post-closing purchase price adjustment, tax matter, or other post-closing matter;
(iv) any litigation, arbitration, mediation, or other proceeding initiated, prosecuted, or defended by or against the Representative in connection with the Transaction Documents; and
(v) any claim by any Former Stockholder or any third party challenging or disputing the Representative's authority, actions, or decisions under this Agreement or the Transaction Documents.
(b) Notwithstanding the foregoing, no Former Stockholder shall have any obligation to indemnify any Indemnified Representative Party for any Representative Losses to the extent that such Representative Losses are determined by a court of competent jurisdiction, in a final, non-appealable judgment, to have resulted directly from the willful misconduct, gross negligence, or fraud of the Representative.
Section 7.2 Source of Indemnification
(a) Any indemnification obligations of the Former Stockholders under this Article VII may be satisfied first from the Expense Reserve (to the extent funds are available therein) and, if the Expense Reserve is insufficient to satisfy such obligations, from amounts otherwise distributable to the Former Stockholders from the Escrow Fund or otherwise in connection with the Transaction Documents, in each case in accordance with the Former Stockholders' respective Pro Rata Shares.
(b) The Representative shall be entitled, without any further consent or approval of the Former Stockholders, to apply amounts held in the Expense Reserve to the satisfaction of any Representative Losses incurred by any Indemnified Representative Party, and the amount so applied shall reduce the portion of the Expense Reserve that would otherwise be distributable to the Former Stockholders.
Section 7.3 Survival
The indemnification obligations of the Former Stockholders under this Article VII shall survive the termination of this Agreement, the resignation or removal of the Representative, the expiration of the Escrow Period, the achievement or non-achievement of the CVR Milestone, and the distribution of the Expense Reserve, and shall continue in full force and effect until the expiration of the applicable statute of limitations with respect to any Representative Losses.
ARTICLE VIII — RESIGNATION AND REMOVAL; SUCCESSOR REPRESENTATIVE
Section 8.1 Resignation
(a) The Representative may resign from its appointment hereunder at any time by delivering written notice of resignation to Penterra and to each of the Former Stockholders (at the addresses set forth on Exhibit C or such other addresses as may be provided in accordance with Article IX) at least thirty (30) days prior to the effective date of such resignation.
(b) No resignation of the Representative shall be effective until a successor Representative has been duly appointed in accordance with Section 8.3 and has accepted such appointment in writing. Until a successor Representative has been appointed and has accepted such appointment, the resigning Representative shall continue to serve and shall continue to have all of the rights, powers, authority, duties, and obligations set forth in this Agreement.
Section 8.2 Removal
(a) The Representative may be removed from its appointment hereunder, with or without cause, by the written consent of Former Stockholders holding more than fifty percent (50%) of the aggregate Pro Rata Shares (for purposes of this calculation, excluding any Pro Rata Shares held by the Representative or its Affiliates).
(b) No removal of the Representative shall be effective until a successor Representative has been duly appointed in accordance with Section 8.3 and has accepted such appointment in writing. Until a successor Representative has been appointed and has accepted such appointment, the removed Representative shall continue to serve and shall continue to have all of the rights, powers, authority, duties, and obligations set forth in this Agreement.
(c) Any notice of removal shall be delivered to the Representative, to Penterra, and to each of the Former Stockholders in accordance with Article IX, and shall specify the effective date of removal (subject to the appointment of a successor).
Section 8.3 Appointment of Successor
(a) In the event of the resignation or removal of the Representative pursuant to Section 8.1 or Section 8.2, a successor Representative shall be appointed by the written consent of Former Stockholders holding more than fifty percent (50%) of the aggregate Pro Rata Shares. The successor Representative shall accept its appointment by executing and delivering a written instrument of acceptance to Penterra and the Former Stockholders, in form and substance reasonably acceptable to Penterra.
(b) If no successor Representative has been appointed and has accepted such appointment within sixty (60) days following the delivery of a notice of resignation or removal, the resigning or removed Representative (or any Former Stockholder) may petition the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines jurisdiction, any other court of competent jurisdiction in the State of Delaware) to appoint a successor Representative, and the costs of such proceeding shall be borne by the Former Stockholders pro rata in accordance with their respective Pro Rata Shares and may be payable from the Expense Reserve.
(c) Penterra shall be promptly notified in writing of any change in the identity of the Representative, including the name, address, and contact information of any successor Representative, and such notice shall be delivered in accordance with Article IX.
(d) Upon the appointment and acceptance of a successor Representative, the resigning or removed Representative shall be discharged from its duties and obligations hereunder (except with respect to any obligations that expressly survive such discharge, including indemnification rights under Article VII) and shall promptly deliver to the successor Representative all funds held in the Expense Reserve, together with all books, records, files, correspondence, and other materials in its possession relating to its service as Representative.
ARTICLE IX — NOTICES
Section 9.1 Notices
(a) All notices, demands, requests, claims, consents, waivers, approvals, instructions, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given or made (i) when delivered personally; (ii) one (1) Business Day after being sent by a nationally recognized overnight courier service (with tracking capability); (iii) three (3) Business Days after being sent by certified mail, return receipt requested, postage prepaid; or (iv) when sent by email (with confirmation of receipt by the recipient, which confirmation may be electronic), in each case addressed to the applicable party at the address set forth below (or at such other address as such party may designate by written notice to the other parties in accordance with this Section 9.1):
If to the Representative:
Ridgeline Ventures, LP 1455 Sand Hill Road, Suite 200 Menlo Park, California 94025
Attention: Ava Lindström, Managing Partner
Email: a.lindstrom@ridgelineventures.com
If to Penterra:
Penterra Pharmaceuticals Corp. 400 Innovation Drive, Suite 1200 Princeton, New Jersey 08540
Attention: Lawrence Whittaker, General Counsel and Corporate Secretary
Email: l.whittaker@penterrapharma.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 1700 Market Street, Suite 3400 Philadelphia, Pennsylvania 19103
Attention: Renata Vasquez
Email: r.vasquez@calderwoodharkness.com
If to the Escrow Agent:
Greystone National Bank, N.A. 383 Madison Avenue New York, New York 10179
Attention: Corporate Trust — Escrow Administration
Email: escrow.admin@greystonenational.com
If to the CVR Trustee:
Columnar Trust Services, Inc. 6201 15th Avenue Brooklyn, New York 11219
Attention: Trust Administration
Email: trustadmin@columnartrust.com
If to any Former Stockholder, to the address set forth on Exhibit C attached hereto.
(b) Any party may change its address for notices by delivering written notice of such change to the other parties in accordance with this Section 9.1.
ARTICLE X — GENERAL PROVISIONS
Section 10.1 Term and Termination
(a) This Agreement shall become effective as of the Closing Date (as defined in the Merger Agreement) and shall continue in full force and effect until the latest to occur of: (i) the final resolution of all indemnification claims, escrow disbursements, purchase price adjustments, tax matters, and other post-closing matters arising under or in connection with the Transaction Documents; (ii) the expiration of the eighteen (18)-month Escrow Period and the final release and distribution of all remaining funds held in the Escrow Fund to the Former Stockholders; and (iii) the final resolution of all CVR-related matters, including the achievement or definitive non-achievement of the CVR Milestone, the payment or non-payment of the CVR Payment, and the resolution of any disputes related thereto, but in no event later than June 30, 2027 (unless extended by agreement of the Parties in connection with any pending dispute or unresolved matter).
(b) Notwithstanding the termination of this Agreement, the provisions of Article VI (Exculpation of the Representative), Article VII (Indemnification of the Representative), Section 5.3 (Distribution of Remaining Balance of Expense Reserve), Section 10.4 (Governing Law), Section 10.5 (Jurisdiction and Venue), Section 10.6 (Waiver of Jury Trial), and this Section 10.1(b) shall survive the termination of this Agreement and shall continue in full force and effect thereafter.
Section 10.2 Amendments
This Agreement may not be amended, modified, or supplemented except by a written instrument signed by (a) Penterra and (b) the Representative, acting with the prior written consent of Former Stockholders holding more than fifty percent (50%) of the aggregate Pro Rata Shares. No amendment, modification, or supplement shall be effective unless it is set forth in a written instrument that expressly states that it is intended to amend, modify, or supplement this Agreement. Any amendment that would adversely and disproportionately affect the rights or obligations of a particular Former Stockholder relative to the other Former Stockholders shall also require the written consent of such affected Former Stockholder.
Section 10.3 Waiver
(a) No waiver of any provision of this Agreement, or consent to any departure therefrom, shall be effective unless set forth in a written instrument signed by the Party against whom enforcement of such waiver or consent is sought.
(b) No failure or delay by any Party in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. All rights and remedies under this Agreement are cumulative and are not exclusive of any other rights or remedies that may be available to the Parties at law or in equity.
Section 10.4 Governing Law
This Agreement, and all claims, controversies, and causes of action arising out of or relating to this Agreement (whether sounding in contract, tort, or otherwise), shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 10.5 Jurisdiction and Venue
(a) Each Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines to accept jurisdiction, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) in any action, suit, or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each Party hereby irrevocably and unconditionally agrees that all claims in respect of any such action, suit, or proceeding shall be heard and determined in such courts.
(b) Each Party hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, (i) any objection that it may now or hereafter have to the laying of venue of any action, suit, or proceeding in any court referred to in Section 10.5(a), and (ii) the defense of an inconvenient forum to the maintenance of any such action, suit, or proceeding in any such court.
(c) Each Party agrees that a final judgment in any such action, suit, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.
Section 10.6 WAIVER OF JURY TRIAL
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE TRANSACTION DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6.
Section 10.7 Assignment
(a) The Representative may not assign, delegate, or transfer any of its rights or obligations under this Agreement, except to a successor Representative duly appointed in accordance with Article VIII of this Agreement. Any purported assignment, delegation, or transfer in violation of this Section 10.7 shall be null and void and of no force or effect.
(b) This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Nothing in this Agreement shall prevent or restrict any merger, consolidation, reorganization, or similar transaction involving Penterra, and in the event of any such transaction, the successor entity shall be bound by the terms of this Agreement.
Section 10.8 Severability
If any provision of this Agreement, or the application of any such provision to any Person or circumstance, shall be held invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and the remaining provisions of this Agreement shall remain in full force and effect and shall be enforceable in accordance with their terms. The Parties shall endeavor in good faith to negotiate a substitute provision that is valid, legal, and enforceable and that carries out the original intent of the Parties as closely as possible.
Section 10.9 Entire Agreement
This Agreement, together with the Merger Agreement, the Escrow Agreement, the CVR Agreement, and the other Transaction Documents (including the exhibits, schedules, and annexes thereto), constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, and agreements (whether written or oral) relating to such subject matter. There are no representations, warranties, covenants, agreements, or conditions with respect to the subject matter hereof other than as expressly set forth in this Agreement and the other Transaction Documents.
Section 10.10 Third-Party Beneficiaries
(a) The Former Stockholders are intended third-party beneficiaries of this Agreement and shall be entitled to enforce the provisions hereof that are intended for their benefit, including, without limitation, the provisions of Article III (Powers and Authority of the Representative), Section 5.3 (Distribution of Remaining Balance of Expense Reserve), and Section 10.10 (Third-Party Beneficiaries); provided, however, that no Former Stockholder shall have the right to enforce any provision of this Agreement in a manner that is inconsistent with the authority granted to the Representative hereunder or that would interfere with the Representative's exercise of its duties and authority.
(b) Greystone National Bank, N.A. (in its capacity as Escrow Agent) and Columnar Trust Services, Inc. (in its capacity as CVR Trustee) are intended third-party beneficiaries of this Agreement solely with respect to