1018-00007 · Penterra Pharmaceuticals Corp · Correspondence

client-advisory-court-decision.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law

1 Federal Street, 35th Floor Boston, Massachusetts 02110 Telephone: (617) 555-4200 Facsimile: (617) 555-4201 www.calderwoodharkness.com

July 18, 2022

VIA EMAIL AND OVERNIGHT

Jennifer Chao, Esq. General Counsel Penterra Pharmaceuticals Corp. 400 Carnegie Center Drive, Suite 600 Princeton, NJ 08540

Re: Penterra Pharmaceuticals Corp. v. Vantage Medical Distribution, LLC Docket No. 2184-CV-01537-BLS Superior Court of Massachusetts, Business Litigation Session, Suffolk County C&H Matter No. 1018-00007

Dear Jennifer:

I am writing on behalf of Calderwood & Harkness LLP to advise Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") of the court's ruling in the above-captioned matter, issued on July 15, 2022. We are pleased to report that the ruling is overwhelmingly favorable to Penterra, and I wish to extend our congratulations on this significant outcome.

In her Memorandum of Decision and Order (the "Decision"), the Honorable Diane L. Costigan, J., of the Superior Court of Massachusetts, Business Litigation Session, Suffolk County, granted Penterra's motion for summary judgment in its entirety, denied the cross-motion for summary judgment filed by Vantage Medical Distribution, LLC ("Vantage"), and dismissed all three of Vantage's counterclaims — namely, breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. The Decision vindicates Penterra's position, which we have maintained throughout this litigation, that the Exclusive Distribution Agreement dated July 1, 2017 (the "EDA") confines Vantage's exclusive territory to the six New England states and that Vantage's unauthorized expansion into the tri-state area of New York, New Jersey, and Pennsylvania was a clear departure from the parties' contractual arrangement.

A copy of the Decision is enclosed with this letter for your records. In the sections that follow, I provide a detailed summary of the court's holdings, an assessment of the procedural posture and any remaining appeal risk, and our recommended next steps for Penterra's consideration.

1. Summary of the Court's Holding

1.1 Declaratory Judgment — Territory Limited to New England

The central issue in this action was the scope of the "Territory" as defined in the EDA and its attached Exhibit A. Penterra sought a declaratory judgment that the Territory is limited to six states; Vantage contended that the Territory had been expanded, either expressly or impliedly, to include New York, New Jersey, and Pennsylvania.

The court squarely resolved this issue in Penterra's favor. Judge Costigan declared that the Territory under the EDA, as defined in Exhibit A thereto, is limited to the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont (collectively, the "New England States"). In reaching this conclusion, the court undertook a careful textual analysis of Exhibit A and found the language to be "clear and unambiguous on its face." The court emphasized that Exhibit A contains a definitive enumeration of the six states comprising the Territory, with no reference to any additional states and no language suggesting that the territorial definition was subject to expansion based on market conditions, performance thresholds, or any other criteria.

Having established the boundaries of the Territory, the court further held that Vantage's distribution of Oncalaris® (pegvisomant-axel) in New York, New Jersey, and Pennsylvania — which commenced on or about September 14, 2020 — was unauthorized under the EDA. The court noted that Vantage had not obtained "prior written consent" from Penterra to distribute outside the defined Territory, as required under Section 2.3 of the EDA. The court further observed that the approximately $6.4 million in revenues that Vantage generated from tri-state sales between September 2020 and March 2021 were derived entirely from distribution activities conducted outside the contractually defined Territory. This finding is significant not only for the declaratory relief sought by Penterra but also for any future consideration of damages or disgorgement remedies, as discussed in Section 3.3 below.

1.2 Rejection of the Kapoor Email Argument

Vantage's principal argument in opposition to Penterra's motion — and in support of its own cross-motion — rested on a January 12, 2018 email from Steven Kapoor, Penterra's Vice President of Commercial Operations, to Donald Farnham, the Chief Executive Officer of Vantage (the "Kapoor Email"). The court analyzed this email in considerable detail.

The relevant language of the Kapoor Email, as quoted in the Decision, states:

"We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped. Let's circle back mid-year and see where things stand."

Vantage argued that this language constituted either (a) "prior written consent" within the meaning of Section 2.3 of the EDA, authorizing Vantage to distribute Oncalaris® in the tri-state area, or (b) an amendment to Exhibit A expanding the territorial definition to include New York, New Jersey, and Pennsylvania.

The court rejected both contentions. With respect to the "prior written consent" argument, Judge Costigan held that the Kapoor Email, read in its entirety and in context, expressed nothing more than a willingness on the part of Penterra to negotiate a potential future expansion of Vantage's territory. The court found the email's language to be aspirational and forward-looking, not directive or authorizing. The use of phrases such as "open to exploring" and "let's circle back" plainly indicated that no decision had been made and that further discussions would be required before any expansion could occur. The court concluded that this language fell far short of "prior written consent" to distribute outside the New England States.

With respect to the amendment argument, the court's analysis was equally decisive. Section 13.1 of the EDA provides that "[n]o amendment, modification, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by both parties." The court held that the Kapoor Email was neither a bilateral instrument nor signed by both parties. It was a unilateral, informal communication from a single Penterra executive — not a negotiated contractual amendment bearing the signatures of authorized representatives of both Penterra and Vantage. Accordingly, even if the Kapoor Email could be read as expressing an intent to expand the Territory (which the court found it did not), it would fail to satisfy the procedural requirements of Section 13.1 for a valid amendment to the EDA.

This holding effectively eliminated Vantage's strongest factual basis for claiming territorial rights outside New England and underscored the importance of the EDA's written-amendment requirement — a provision that we ensured was prominently featured in Penterra's summary judgment briefing.

1.3 Rejection of Course-of-Dealing / Implied Modification Argument

In the alternative, Vantage argued that even if the Kapoor Email did not constitute prior written consent or a formal amendment, Penterra's course of dealing with Vantage over the three-year period following execution of the EDA effected an implied modification of Exhibit A. Specifically, Vantage pointed to Penterra's alleged failure to object when Vantage began making limited shipments into New York in late 2019, and to various other interactions between the parties' commercial teams that Vantage characterized as reflecting a mutual understanding that Vantage would eventually serve the tri-state market.

The court rejected this argument on multiple independent grounds.

First, the court relied on the integration clause contained in Section 14.8 of the EDA, which provides that the Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, or agreements relating thereto, whether written or oral." Judge Costigan held that this integration clause operated to exclude extrinsic evidence of the parties' alleged course of dealing as a basis for modifying the express terms of the EDA.

Second, and relatedly, the court held that the written-amendment requirement in Section 13.1 precluded any modification of the EDA — including a modification of the territorial definition in Exhibit A — through the parties' conduct or course of dealing, absent a signed written instrument effectuating such modification. No such instrument was presented to the court.

Third, the court grounded its analysis in well-established Massachusetts precedent, citing Cambridge Biotech Corp. v. Pasteur Falveris Diagnostics, 433 Mass. 122 (2000), for the proposition that written-modification clauses are generally enforceable under Massachusetts law and serve to preclude claims of oral or implied modification. The court observed that Massachusetts courts have consistently enforced such clauses in the commercial context, and that Vantage, as a sophisticated commercial entity represented by counsel at the time of contract execution, was bound by the modification procedures to which it had agreed.

This aspect of the Decision is particularly important from a precedential standpoint, as it reinforces the enforceability of carefully drafted integration and written-amendment provisions — provisions that Calderwood & Harkness routinely recommends for inclusion in distribution agreements and other commercial contracts.

1.4 Dismissal of Vantage's Counterclaims

In addition to granting Penterra's motion for summary judgment on the declaratory-judgment claim, the court dismissed each of Vantage's three counterclaims. The court's analysis of each counterclaim is summarized below.

Breach of Contract Counterclaim. Vantage alleged that Penterra breached the EDA by taking steps to appoint an alternative distributor for the tri-state area, specifically by executing a term sheet with Meridian National Distributors, Inc. ("Meridian") dated February 15, 2021. The court dismissed this counterclaim on the straightforward ground that Vantage had no contractual right to distribute Oncalaris® in New York, New Jersey, or Pennsylvania. Because the Territory was limited to the six New England States, Penterra's decision to appoint another distributor (or to take preliminary steps toward doing so via the Meridian term sheet) for the tri-state area could not, as a matter of law, constitute a breach of Vantage's exclusive distribution rights under the EDA. Those rights simply did not extend to the geographic area at issue.

Breach of the Implied Covenant of Good Faith and Fair Dealing Counterclaim. Vantage alleged that even if the EDA did not expressly grant Vantage distribution rights in the tri-state area, Penterra acted in bad faith by (a) encouraging Vantage's expectation that it would be permitted to expand into those states, and (b) subsequently seeking to appoint a competing distributor for the same territory. The court dismissed this counterclaim, holding that Penterra acted consistently with the express terms of the EDA at all times. The court reiterated the well-settled principle of Massachusetts law that the implied covenant of good faith and fair dealing cannot be invoked to override or contradict clear and unambiguous contractual language. Because the EDA plainly limited the Territory to the New England States, and because Penterra's actions were consistent with that limitation, Vantage's implied-covenant claim could not survive summary judgment.

Promissory Estoppel Counterclaim. Vantage's final counterclaim asserted that the Kapoor Email constituted a clear and unambiguous promise by Penterra that Vantage would be granted distribution rights in the tri-state area, and that Vantage reasonably relied on that promise to its detriment by investing in tri-state distribution infrastructure and sales operations. The court dismissed this counterclaim on two grounds. First, the court found that the Kapoor Email was insufficiently definite to constitute a "clear and unambiguous promise" — the essential predicate for a promissory estoppel claim under Massachusetts law. The language of the email expressed, at most, a willingness to explore a potential future arrangement, not a concrete commitment or guarantee. Second, the court held that the integration clause in Section 14.8 and the written-amendment requirement in Section 13.1 further undercut any claim of reasonable reliance. Vantage, as a party to the EDA, was on notice that modifications to the agreement — including any expansion of the Territory — could be accomplished only through a signed written instrument. Vantage's reliance on an informal email as a basis for making significant capital expenditures in the tri-state area was therefore not reasonable as a matter of law.

With respect to Vantage's claimed damages of approximately $35 million across all three counterclaims, the court did not reach the merits of the damages calculation, given the dismissal of each underlying counterclaim theory. This outcome eliminates the entirety of Vantage's claimed monetary exposure to Penterra.

2. Procedural Status and Appeal Period

2.1 Entry of Final Judgment

While the Memorandum of Decision and Order was issued by the court on July 15, 2022, we note that as of the date of this letter — July 18, 2022 — Final Judgment has not yet been entered on the docket. This is not unusual; there is typically a short administrative interval between the issuance of a decision on dispositive motions and the formal entry of judgment by the clerk's office. We expect Final Judgment to be entered imminently, and we will notify you promptly when it appears on the docket. The timing of this entry is significant because it triggers the period within which Vantage may file a notice of appeal, as discussed immediately below.

2.2 Appeal Period

Under the Massachusetts Rules of Appellate Procedure, Rule 4(a), Vantage has thirty (30) days from the date of entry of Final Judgment to file a notice of appeal with the Massachusetts Appeals Court. Calderwood & Harkness will actively monitor the docket for any notice of appeal or any other post-judgment filing by Vantage, including any motion to alter or amend the judgment under Mass. R. Civ. P. 59(e) (which, if filed, would toll the appeal period).

We have carefully assessed the likelihood that Vantage will pursue an appeal. Based on the strength of Judge Costigan's reasoning, the clarity of the contract language at issue, and the well-established Massachusetts precedent upon which the Decision relies — including, most notably, Cambridge Biotech Corp. v. Pasteur Falveris Diagnostics, 433 Mass. 122 (2000) — we believe that Vantage's prospects on appeal would be poor. The Decision is grounded in a straightforward application of contract interpretation principles to unambiguous contractual text, and appellate courts afford considerable deference to such holdings, particularly where the trial court has applied settled law to undisputed facts.

That said, we cannot rule out the possibility that Vantage may nonetheless choose to file an appeal. There are several reasons for this assessment. First, the amounts at stake are substantial — Vantage's claimed counterclaim damages alone totaled approximately $35 million, and the loss of any future distribution rights in the tri-state area carries significant ongoing commercial consequences for Vantage. Second, the Penterra distribution relationship is of critical importance to Vantage's business. Based on publicly available information and materials produced in discovery, Penterra products accounted for approximately $67 million in revenue for Vantage in its fiscal year 2021, representing roughly 45.3% of Vantage's total revenues of approximately $148 million for that period. Given the magnitude of Vantage's financial stake, it would not be surprising for Vantage to pursue all available avenues, including an appeal, even if the odds of success are limited.

We will keep you informed of all developments and will provide a more detailed appellate risk assessment in the event that a notice of appeal is filed.

2.3 Preservation Steps

In light of the foregoing, Calderwood & Harkness will maintain the complete litigation file and will continue to monitor the docket through the expiration of the appeal period (and through the resolution of any appeal, should one be filed). During this period, we recommend that Penterra continue to preserve all documents, communications, and electronically stored information subject to the litigation hold that was implemented at the commencement of this action. This includes, without limitation, all materials in the custody or control of the legal, commercial, regulatory, and finance departments, as well as any materials held by individual custodians identified in the litigation hold notice.

Once the appeal period has expired without a notice of appeal being filed — or, in the event of an appeal, once the appellate proceedings have concluded — we will advise Penterra on the appropriate timing and procedure for lifting the litigation hold. We recognize that the maintenance of a litigation hold imposes ongoing administrative and operational burdens, and we will work with your team to lift the hold at the earliest appropriate time consistent with Penterra's legal obligations.

3. Practical Implications and Recommended Next Steps

The Decision has several significant practical implications for Penterra's commercial strategy and legal posture. We address each in turn below and offer our recommendations.

3.1 Proceed with the Meridian Distribution Arrangement

With the court's unequivocal declaration that the Territory under the EDA is limited to the six New England States, Penterra is now free to appoint Meridian National Distributors, Inc. ("Meridian") — or any other distributor of its choosing — to distribute Oncalaris® in New York, New Jersey, and Pennsylvania. The legal cloud that Vantage's territorial claims had cast over Penterra's tri-state distribution plans has been fully resolved.

As you are aware, the term sheet with Meridian was executed on February 15, 2021, but the parties' progress toward a definitive distribution agreement stalled when Vantage asserted its purported exclusive rights over the tri-state area and commenced its counterclaim campaign. With the counterclaims now dismissed and the territorial issue resolved in Penterra's favor, we recommend that Penterra promptly re-engage Thomas Welliver at Meridian to resume negotiations and finalize the definitive distribution agreement for the tri-state territory.

In connection with the Meridian arrangement, we also recommend that any new distribution agreement incorporate several provisions informed by the lessons of this litigation:

• Clear Territorial Definitions. The territorial scope of the agreement should be defined with precision and specificity, whether through an exhibit enumerating the covered states, a detailed geographic description, or both. Ambiguity in territorial provisions is the single most common source of distribution disputes, and this litigation underscores the value of clear drafting.

• Robust Written-Amendment Requirements. The agreement should include a written-amendment clause substantially similar to Section 13.1 of the EDA, requiring that any amendment, modification, or waiver be set forth in a written instrument signed by both parties. This provision proved instrumental in defeating Vantage's claims and should be a standard feature of all of Penterra's distribution agreements.

• Comprehensive Integration Clause. Similarly, the agreement should contain a comprehensive integration clause providing that the written agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, representations, and agreements, whether written or oral.

• Employee Communication Protocols. Penterra may also wish to implement internal protocols governing communications by commercial team members with distribution partners regarding potential territorial expansions or other material modifications. The Kapoor Email, while ultimately found insufficient to modify the EDA, illustrates the risk that informal communications by company personnel can be cited in support of modification or estoppel claims.

Calderwood & Harkness's corporate and commercial contracts group would be pleased to assist with the negotiation and drafting of the Meridian distribution agreement. Please let us know if you would like us to engage on that front.

3.2 Status of the EDA with Vantage

It is important to note that the court's ruling does not terminate the EDA or Vantage's distribution rights within the six New England States. Those rights remain governed by the terms of the EDA, subject to its expiration and renewal provisions.

As a threshold matter, the original five-year term of the EDA expired on June 30, 2022 — that is, during the pendency of this litigation. Under Section 3.2 of the EDA, the agreement contains two successive one-year automatic renewal options, pursuant to which the EDA renews for an additional one-year period unless either party provides at least 180 days' written notice of non-renewal prior to the expiration of the then-current term.

We recommend that Penterra's commercial team — specifically, Steven Kapoor and Rachel Mendez — confirm the status of any renewal notice or non-renewal notice that may have been sent with respect to the EDA. If Penterra provided timely notice of non-renewal (i.e., on or before December 31, 2021, for the June 30, 2022 expiration), then the EDA has expired by its terms and Penterra would be free to appoint a new distributor for the New England territory or to enter into a new arrangement with Vantage on revised terms. If no non-renewal notice was sent, the EDA may have automatically renewed for an additional one-year term through June 30, 2023, and Penterra should assess whether it wishes to send a non-renewal notice for the next available renewal period.

More broadly, Penterra should clarify its desired commercial relationship with Vantage going forward within the New England territory. Vantage has been an effective distributor of Penterra products in New England, and the commercial considerations may favor maintaining the relationship on appropriate terms — notwithstanding the tensions arising from this litigation. Alternatively, Penterra may prefer to transition to a different distribution partner in New England. These are business decisions that Penterra's commercial leadership is best positioned to make, and we are available to advise on the legal implications of any course of action selected.

3.3 Vantage's Unauthorized Tri-State Sales

The court's ruling establishes, as a matter of adjudicated fact, that Vantage's distribution of Oncalaris® in New York, New Jersey, and Pennsylvania between approximately September 2020 and March 2021 was unauthorized under the EDA. During that period, Vantage generated approximately $6.4 million in revenues from tri-state sales.

Penterra may wish to consider whether to seek damages or other remedies from Vantage on account of these unauthorized sales. The declaratory-judgment action resolved the threshold territorial question, but Penterra did not assert affirmative damages claims in this proceeding. Potential theories of recovery could include breach of contract (i.e., Vantage's breach of the territorial restriction in the EDA), disgorgement of profits earned from unauthorized sales, or an accounting of all revenues and costs associated with the tri-state distribution activities.

We are available to advise Penterra on whether a separate action or a pre-litigation demand for an accounting and disgorgement would be warranted. In conducting this analysis, however, we would recommend that Penterra carefully weigh the following considerations:

• The amounts potentially recoverable, including the relationship between Vantage's gross revenues of approximately $6.4 million and its net profits from those sales (which may be substantially lower after accounting for cost of goods sold, distribution expenses, and other direct costs);

• The anticipated litigation costs of pursuing a separate damages action, including the possibility that Vantage would vigorously contest both liability (notwithstanding the court's declaratory ruling) and the measure of damages;

• The impact of a damages action on the ongoing commercial relationship between Penterra and Vantage in the New England territory, to the extent Penterra wishes to maintain that relationship; and

• The potential for a negotiated resolution, either through a lump-sum settlement or through a credit against future amounts payable by Penterra under the EDA.

We would be happy to discuss these considerations with you and your team at your convenience.

3.4 Public Disclosure Considerations

As a publicly traded company listed on Nasdaq under the ticker symbol PTRA, Penterra should consider whether the resolution of this matter requires or warrants disclosure in its periodic filings with the Securities and Exchange Commission. Several aspects of the ruling may be relevant to Penterra's disclosure obligations.

First, the dismissal of Vantage's counterclaims — which alleged damages of approximately $35 million — eliminates a significant contingent liability that may have been previously disclosed or reserved for in Penterra's financial statements. To the extent that the litigation was described as a risk factor or contingent liability in Penterra's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, the favorable resolution should be reflected in Penterra's next periodic filing.

Second, the court's confirmation of Penterra's right to appoint a distributor for the tri-state area may have forward-looking commercial significance that warrants disclosure, particularly if the Meridian arrangement proceeds and is expected to have a material impact on revenues.

We recommend coordination with Penterra's independent auditor, Whitfield & Pryce LLP, and with the Company's internal finance team to assess the impact of the ruling on financial reporting, including any adjustments to previously recorded litigation reserves or accruals. We also recommend consultation with Penterra's securities counsel (whether internal or external) regarding the timing and content of any required disclosures.

3.5 Insurance Notification

Penterra should promptly notify its relevant insurance carriers of the favorable outcome in this matter, to the extent that prior notice of the litigation was provided to those carriers. Specifically:

• Atlantic Shield Insurance Co., Penterra's directors' and officers' liability insurer, should be informed of the dismissal of Vantage's counterclaims. This notification may affect any reserving or coverage assessments previously made by the carrier in connection with the litigation.

• Commonwealth Mutual Assurance Corp., Penterra's commercial general liability insurer, should also be notified. Depending on the terms of the applicable policy, the favorable resolution may entitle Penterra to a release of any reserves held by the carrier or may impact Penterra's future premium calculations.

We recommend that these notifications be made in writing and that copies of the Decision be provided to each carrier. Calderwood & Harkness can assist with the preparation of these notifications if desired.

4. Fees and Budget Update

We wish to provide a brief update on fees and costs in connection with this engagement. As you will recall, the engagement terms provide for hourly billing at Calderwood & Harkness's standard rates, subject to a seven percent (7%) discount, with an estimated budget range of $750,000 to $1,200,000 through trial. Because the matter resolved on summary judgment without the need for trial — including the elimination of trial preparation, witness preparation, expert testimony, and the trial itself — we are pleased to report that total fees and costs incurred in this matter are well within the estimated budget.

Final invoicing details, including a comprehensive summary of all fees and costs incurred through the conclusion of the engagement (or through the expiration of the appeal period, as applicable), will be provided separately by Priya Anand, the billing partner on this matter. Priya will be in touch with your office to coordinate the final billing process.

We wish to express our sincere appreciation for the collaborative and productive working relationship that we have enjoyed with you and the entire Penterra legal and commercial team throughout the course of this litigation. Your team's responsiveness in connection with discovery, document production, and factual development was instrumental in building the summary judgment record that led to this favorable result.

Conclusion

In sum, the court's Memorandum of Decision and Order represents a significant and favorable result for Penterra. The ruling confirms the Company's contractual rights, eliminates $35 million in counterclaim exposure, and clears the path for Penterra to proceed with its tri-state distribution strategy. While certain follow-up matters remain — including the monitoring of the appeal period, the finalization of the Meridian arrangement, the assessment of potential damages claims against Vantage, and the disclosure and insurance considerations discussed above — Penterra is in an excellent position as a result of this litigation.

The Calderwood & Harkness engagement team — Linda Osei, Priya Anand, Hannah Brinkley, and Patrick Gallagher — remains fully available to address any questions you may have regarding the Decision, the procedural next steps, or any of the recommended actions described in this letter. We would welcome the opportunity to schedule a call with you and, if you think it appropriate, with Dr. Marcus Lindholm and Steven Kapoor, to discuss the ruling and next steps in greater detail at a time that is convenient for your schedules. Please do not hesitate to reach out at your convenience.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Linda Osei Partner

1 Federal Street, 35th Floor Boston, Massachusetts 02110 Direct Dial: (617) 555-4237

Email: losei@calderwoodharkness.com

cc: Priya Anand, Esq., Calderwood & Harkness LLP Hannah Brinkley, Esq., Calderwood & Harkness LLP

Enclosure: Copy of the Court's Memorandum of Decision and Order dated July 15, 2022

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION. This letter and its enclosure are protected by the attorney-client privilege and the work product doctrine. This communication is intended solely for the use of the individual or entity to whom it is addressed. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, copying, or action taken in reliance on the contents of this communication is strictly prohibited. If you have received this communication in error, please notify Calderwood & Harkness LLP immediately at (617) 555-4200 and destroy all copies.

CALDERWOOD & HARKNESS LLP Attorneys at Law
1 Federal Street, 35th Floor Boston, Massachusetts 02110 Telephone: (617) 555-4200 Facsimile: (617) 555-4201 www.calderwoodharkness.com
July 18, 2022
VIA EMAIL AND OVERNIGHT
Jennifer Chao, Esq. General Counsel Penterra Pharmaceuticals Corp. 400 Carnegie Center Drive, Suite 600 Princeton, NJ 08540
Re: Penterra Pharmaceuticals Corp. v. Vantage Medical Distribution, LLC Docket No. 2184-CV-01537-BLS Superior Court of Massachusetts, Business Litigation Session, Suffolk County C&H Matter No. 1018-00007
Dear Jennifer:
I am writing on behalf of Calderwood & Harkness LLP to advise Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") of the court's ruling in the above-captioned matter, issued on July 15, 2022. We are pleased to report that the ruling is overwhelmingly favorable to Penterra, and I wish to extend our congratulations on this significant outcome.
In her Memorandum of Decision and Order (the "Decision"), the Honorable Diane L. Costigan, J., of the Superior Court of Massachusetts, Business Litigation Session, Suffolk County, granted Penterra's motion for summary judgment in its entirety, denied the cross-motion for summary judgment filed by Vantage Medical Distribution, LLC ("Vantage"), and dismissed all three of Vantage's counterclaims — namely, breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. The Decision vindicates Penterra's position, which we have maintained throughout this litigation, that the Exclusive Distribution Agreement dated July 1, 2017 (the "EDA") confines Vantage's exclusive territory to the six New England states and that Vantage's unauthorized expansion into the tri-state area of New York, New Jersey, and Pennsylvania was a clear departure from the parties' contractual arrangement.
A copy of the Decision is enclosed with this letter for your records. In the sections that follow, I provide a detailed summary of the court's holdings, an assessment of the procedural posture and any remaining appeal risk, and our recommended next steps for Penterra's consideration.
1. Summary of the Court's Holding
1.1 Declaratory Judgment — Territory Limited to New England
The central issue in this action was the scope of the "Territory" as defined in the EDA and its attached Exhibit A. Penterra sought a declaratory judgment that the Territory is limited to six states; Vantage contended that the Territory had been expanded, either expressly or impliedly, to include New York, New Jersey, and Pennsylvania.
The court squarely resolved this issue in Penterra's favor. Judge Costigan declared that the Territory under the EDA, as defined in Exhibit A thereto, is limited to the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont (collectively, the "New England States"). In reaching this conclusion, the court undertook a careful textual analysis of Exhibit A and found the language to be "clear and unambiguous on its face." The court emphasized that Exhibit A contains a definitive enumeration of the six states comprising the Territory, with no reference to any additional states and no language suggesting that the territorial definition was subject to expansion based on market conditions, performance thresholds, or any other criteria.
Having established the boundaries of the Territory, the court further held that Vantage's distribution of Oncalaris® (pegvisomant-axel) in New York, New Jersey, and Pennsylvania — which commenced on or about September 14, 2020 — was unauthorized under the EDA. The court noted that Vantage had not obtained "prior written consent" from Penterra to distribute outside the defined Territory, as required under Section 2.3 of the EDA. The court further observed that the approximately $6.4 million in revenues that Vantage generated from tri-state sales between September 2020 and March 2021 were derived entirely from distribution activities conducted outside the contractually defined Territory. This finding is significant not only for the declaratory relief sought by Penterra but also for any future consideration of damages or disgorgement remedies, as discussed in Section 3.3 below.
1.2 Rejection of the Kapoor Email Argument
Vantage's principal argument in opposition to Penterra's motion — and in support of its own cross-motion — rested on a January 12, 2018 email from Steven Kapoor, Penterra's Vice President of Commercial Operations, to Donald Farnham, the Chief Executive Officer of Vantage (the "Kapoor Email"). The court analyzed this email in considerable detail.
The relevant language of the Kapoor Email, as quoted in the Decision, states:
"We're definitely open to exploring expansion into NY/NJ/PA once your New England footprint is fully ramped. Let's circle back mid-year and see where things stand."
Vantage argued that this language constituted either (a) "prior written consent" within the meaning of Section 2.3 of the EDA, authorizing Vantage to distribute Oncalaris® in the tri-state area, or (b) an amendment to Exhibit A expanding the territorial definition to include New York, New Jersey, and Pennsylvania.
The court rejected both contentions. With respect to the "prior written consent" argument, Judge Costigan held that the Kapoor Email, read in its entirety and in context, expressed nothing more than a willingness on the part of Penterra to negotiate a potential future expansion of Vantage's territory. The court found the email's language to be aspirational and forward-looking, not directive or authorizing. The use of phrases such as "open to exploring" and "let's circle back" plainly indicated that no decision had been made and that further discussions would be required before any expansion could occur. The court concluded that this language fell far short of "prior written consent" to distribute outside the New England States.
With respect to the amendment argument, the court's analysis was equally decisive. Section 13.1 of the EDA provides that "[n]o amendment, modification, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by both parties." The court held that the Kapoor Email was neither a bilateral instrument nor signed by both parties. It was a unilateral, informal communication from a single Penterra executive — not a negotiated contractual amendment bearing the signatures of authorized representatives of both Penterra and Vantage. Accordingly, even if the Kapoor Email could be read as expressing an intent to expand the Territory (which the court found it did not), it would fail to satisfy the procedural requirements of Section 13.1 for a valid amendment to the EDA.
This holding effectively eliminated Vantage's strongest factual basis for claiming territorial rights outside New England and underscored the importance of the EDA's written-amendment requirement — a provision that we ensured was prominently featured in Penterra's summary judgment briefing.
1.3 Rejection of Course-of-Dealing / Implied Modification Argument
In the alternative, Vantage argued that even if the Kapoor Email did not constitute prior written consent or a formal amendment, Penterra's course of dealing with Vantage over the three-year period following execution of the EDA effected an implied modification of Exhibit A. Specifically, Vantage pointed to Penterra's alleged failure to object when Vantage began making limited shipments into New York in late 2019, and to various other interactions between the parties' commercial teams that Vantage characterized as reflecting a mutual understanding that Vantage would eventually serve the tri-state market.
The court rejected this argument on multiple independent grounds.
First, the court relied on the integration clause contained in Section 14.8 of the EDA, which provides that the Agreement "constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, or agreements relating thereto, whether written or oral." Judge Costigan held that this integration clause operated to exclude extrinsic evidence of the parties' alleged course of dealing as a basis for modifying the express terms of the EDA.
Second, and relatedly, the court held that the written-amendment requirement in Section 13.1 precluded any modification of the EDA — including a modification of the territorial definition in Exhibit A — through the parties' conduct or course of dealing, absent a signed written instrument effectuating such modification. No such instrument was presented to the court.
Third, the court grounded its analysis in well-established Massachusetts precedent, citing Cambridge Biotech Corp. v. Pasteur Falveris Diagnostics, 433 Mass. 122 (2000), for the proposition that written-modification clauses are generally enforceable under Massachusetts law and serve to preclude claims of oral or implied modification. The court observed that Massachusetts courts have consistently enforced such clauses in the commercial context, and that Vantage, as a sophisticated commercial entity represented by counsel at the time of contract execution, was bound by the modification procedures to which it had agreed.
This aspect of the Decision is particularly important from a precedential standpoint, as it reinforces the enforceability of carefully drafted integration and written-amendment provisions — provisions that Calderwood & Harkness routinely recommends for inclusion in distribution agreements and other commercial contracts.
1.4 Dismissal of Vantage's Counterclaims
In addition to granting Penterra's motion for summary judgment on the declaratory-judgment claim, the court dismissed each of Vantage's three counterclaims. The court's analysis of each counterclaim is summarized below.
Breach of Contract Counterclaim. Vantage alleged that Penterra breached the EDA by taking steps to appoint an alternative distributor for the tri-state area, specifically by executing a term sheet with Meridian National Distributors, Inc. ("Meridian") dated February 15, 2021. The court dismissed this counterclaim on the straightforward ground that Vantage had no contractual right to distribute Oncalaris® in New York, New Jersey, or Pennsylvania. Because the Territory was limited to the six New England States, Penterra's decision to appoint another distributor (or to take preliminary steps toward doing so via the Meridian term sheet) for the tri-state area could not, as a matter of law, constitute a breach of Vantage's exclusive distribution rights under the EDA. Those rights simply did not extend to the geographic area at issue.
Breach of the Implied Covenant of Good Faith and Fair Dealing Counterclaim. Vantage alleged that even if the EDA did not expressly grant Vantage distribution rights in the tri-state area, Penterra acted in bad faith by (a) encouraging Vantage's expectation that it would be permitted to expand into those states, and (b) subsequently seeking to appoint a competing distributor for the same territory. The court dismissed this counterclaim, holding that Penterra acted consistently with the express terms of the EDA at all times. The court reiterated the well-settled principle of Massachusetts law that the implied covenant of good faith and fair dealing cannot be invoked to override or contradict clear and unambiguous contractual language. Because the EDA plainly limited the Territory to the New England States, and because Penterra's actions were consistent with that limitation, Vantage's implied-covenant claim could not survive summary judgment.
Promissory Estoppel Counterclaim. Vantage's final counterclaim asserted that the Kapoor Email constituted a clear and unambiguous promise by Penterra that Vantage would be granted distribution rights in the tri-state area, and that Vantage reasonably relied on that promise to its detriment by investing in tri-state distribution infrastructure and sales operations. The court dismissed this counterclaim on two grounds. First, the court found that the Kapoor Email was insufficiently definite to constitute a "clear and unambiguous promise" — the essential predicate for a promissory estoppel claim under Massachusetts law. The language of the email expressed, at most, a willingness to explore a potential future arrangement, not a concrete commitment or guarantee. Second, the court held that the integration clause in Section 14.8 and the written-amendment requirement in Section 13.1 further undercut any claim of reasonable reliance. Vantage, as a party to the EDA, was on notice that modifications to the agreement — including any expansion of the Territory — could be accomplished only through a signed written instrument. Vantage's reliance on an informal email as a basis for making significant capital expenditures in the tri-state area was therefore not reasonable as a matter of law.
With respect to Vantage's claimed damages of approximately $35 million across all three counterclaims, the court did not reach the merits of the damages calculation, given the dismissal of each underlying counterclaim theory. This outcome eliminates the entirety of Vantage's claimed monetary exposure to Penterra.
2. Procedural Status and Appeal Period
2.1 Entry of Final Judgment
While the Memorandum of Decision and Order was issued by the court on July 15, 2022, we note that as of the date of this letter — July 18, 2022 — Final Judgment has not yet been entered on the docket. This is not unusual; there is typically a short administrative interval between the issuance of a decision on dispositive motions and the formal entry of judgment by the clerk's office. We expect Final Judgment to be entered imminently, and we will notify you promptly when it appears on the docket. The timing of this entry is significant because it triggers the period within which Vantage may file a notice of appeal, as discussed immediately below.
2.2 Appeal Period
Under the Massachusetts Rules of Appellate Procedure, Rule 4(a), Vantage has thirty (30) days from the date of entry of Final Judgment to file a notice of appeal with the Massachusetts Appeals Court. Calderwood & Harkness will actively monitor the docket for any notice of appeal or any other post-judgment filing by Vantage, including any motion to alter or amend the judgment under Mass. R. Civ. P. 59(e) (which, if filed, would toll the appeal period).
We have carefully assessed the likelihood that Vantage will pursue an appeal. Based on the strength of Judge Costigan's reasoning, the clarity of the contract language at issue, and the well-established Massachusetts precedent upon which the Decision relies — including, most notably, Cambridge Biotech Corp. v. Pasteur Falveris Diagnostics, 433 Mass. 122 (2000) — we believe that Vantage's prospects on appeal would be poor. The Decision is grounded in a straightforward application of contract interpretation principles to unambiguous contractual text, and appellate courts afford considerable deference to such holdings, particularly where the trial court has applied settled law to undisputed facts.
That said, we cannot rule out the possibility that Vantage may nonetheless choose to file an appeal. There are several reasons for this assessment. First, the amounts at stake are substantial — Vantage's claimed counterclaim damages alone totaled approximately $35 million, and the loss of any future distribution rights in the tri-state area carries significant ongoing commercial consequences for Vantage. Second, the Penterra distribution relationship is of critical importance to Vantage's business. Based on publicly available information and materials produced in discovery, Penterra products accounted for approximately $67 million in revenue for Vantage in its fiscal year 2021, representing roughly 45.3% of Vantage's total revenues of approximately $148 million for that period. Given the magnitude of Vantage's financial stake, it would not be surprising for Vantage to pursue all available avenues, including an appeal, even if the odds of success are limited.
We will keep you informed of all developments and will provide a more detailed appellate risk assessment in the event that a notice of appeal is filed.
2.3 Preservation Steps
In light of the foregoing, Calderwood & Harkness will maintain the complete litigation file and will continue to monitor the docket through the expiration of the appeal period (and through the resolution of any appeal, should one be filed). During this period, we recommend that Penterra continue to preserve all documents, communications, and electronically stored information subject to the litigation hold that was implemented at the commencement of this action. This includes, without limitation, all materials in the custody or control of the legal, commercial, regulatory, and finance departments, as well as any materials held by individual custodians identified in the litigation hold notice.
Once the appeal period has expired without a notice of appeal being filed — or, in the event of an appeal, once the appellate proceedings have concluded — we will advise Penterra on the appropriate timing and procedure for lifting the litigation hold. We recognize that the maintenance of a litigation hold imposes ongoing administrative and operational burdens, and we will work with your team to lift the hold at the earliest appropriate time consistent with Penterra's legal obligations.
3. Practical Implications and Recommended Next Steps
The Decision has several significant practical implications for Penterra's commercial strategy and legal posture. We address each in turn below and offer our recommendations.
3.1 Proceed with the Meridian Distribution Arrangement
With the court's unequivocal declaration that the Territory under the EDA is limited to the six New England States, Penterra is now free to appoint Meridian National Distributors, Inc. ("Meridian") — or any other distributor of its choosing — to distribute Oncalaris® in New York, New Jersey, and Pennsylvania. The legal cloud that Vantage's territorial claims had cast over Penterra's tri-state distribution plans has been fully resolved.
As you are aware, the term sheet with Meridian was executed on February 15, 2021, but the parties' progress toward a definitive distribution agreement stalled when Vantage asserted its purported exclusive rights over the tri-state area and commenced its counterclaim campaign. With the counterclaims now dismissed and the territorial issue resolved in Penterra's favor, we recommend that Penterra promptly re-engage Thomas Welliver at Meridian to resume negotiations and finalize the definitive distribution agreement for the tri-state territory.
In connection with the Meridian arrangement, we also recommend that any new distribution agreement incorporate several provisions informed by the lessons of this litigation:
• Clear Territorial Definitions. The territorial scope of the agreement should be defined with precision and specificity, whether through an exhibit enumerating the covered states, a detailed geographic description, or both. Ambiguity in territorial provisions is the single most common source of distribution disputes, and this litigation underscores the value of clear drafting.
• Robust Written-Amendment Requirements. The agreement should include a written-amendment clause substantially similar to Section 13.1 of the EDA, requiring that any amendment, modification, or waiver be set forth in a written instrument signed by both parties. This provision proved instrumental in defeating Vantage's claims and should be a standard feature of all of Penterra's distribution agreements.
• Comprehensive Integration Clause. Similarly, the agreement should contain a comprehensive integration clause providing that the written agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, representations, and agreements, whether written or oral.
• Employee Communication Protocols. Penterra may also wish to implement internal protocols governing communications by commercial team members with distribution partners regarding potential territorial expansions or other material modifications. The Kapoor Email, while ultimately found insufficient to modify the EDA, illustrates the risk that informal communications by company personnel can be cited in support of modification or estoppel claims.
Calderwood & Harkness's corporate and commercial contracts group would be pleased to assist with the negotiation and drafting of the Meridian distribution agreement. Please let us know if you would like us to engage on that front.
3.2 Status of the EDA with Vantage
It is important to note that the court's ruling does not terminate the EDA or Vantage's distribution rights within the six New England States. Those rights remain governed by the terms of the EDA, subject to its expiration and renewal provisions.
As a threshold matter, the original five-year term of the EDA expired on June 30, 2022 — that is, during the pendency of this litigation. Under Section 3.2 of the EDA, the agreement contains two successive one-year automatic renewal options, pursuant to which the EDA renews for an additional one-year period unless either party provides at least 180 days' written notice of non-renewal prior to the expiration of the then-current term.
We recommend that Penterra's commercial team — specifically, Steven Kapoor and Rachel Mendez — confirm the status of any renewal notice or non-renewal notice that may have been sent with respect to the EDA. If Penterra provided timely notice of non-renewal (i.e., on or before December 31, 2021, for the June 30, 2022 expiration), then the EDA has expired by its terms and Penterra would be free to appoint a new distributor for the New England territory or to enter into a new arrangement with Vantage on revised terms. If no non-renewal notice was sent, the EDA may have automatically renewed for an additional one-year term through June 30, 2023, and Penterra should assess whether it wishes to send a non-renewal notice for the next available renewal period.
More broadly, Penterra should clarify its desired commercial relationship with Vantage going forward within the New England territory. Vantage has been an effective distributor of Penterra products in New England, and the commercial considerations may favor maintaining the relationship on appropriate terms — notwithstanding the tensions arising from this litigation. Alternatively, Penterra may prefer to transition to a different distribution partner in New England. These are business decisions that Penterra's commercial leadership is best positioned to make, and we are available to advise on the legal implications of any course of action selected.
3.3 Vantage's Unauthorized Tri-State Sales
The court's ruling establishes, as a matter of adjudicated fact, that Vantage's distribution of Oncalaris® in New York, New Jersey, and Pennsylvania between approximately September 2020 and March 2021 was unauthorized under the EDA. During that period, Vantage generated approximately $6.4 million in revenues from tri-state sales.
Penterra may wish to consider whether to seek damages or other remedies from Vantage on account of these unauthorized sales. The declaratory-judgment action resolved the threshold territorial question, but Penterra did not assert affirmative damages claims in this proceeding. Potential theories of recovery could include breach of contract (i.e., Vantage's breach of the territorial restriction in the EDA), disgorgement of profits earned from unauthorized sales, or an accounting of all revenues and costs associated with the tri-state distribution activities.
We are available to advise Penterra on whether a separate action or a pre-litigation demand for an accounting and disgorgement would be warranted. In conducting this analysis, however, we would recommend that Penterra carefully weigh the following considerations:
• The amounts potentially recoverable, including the relationship between Vantage's gross revenues of approximately $6.4 million and its net profits from those sales (which may be substantially lower after accounting for cost of goods sold, distribution expenses, and other direct costs);
• The anticipated litigation costs of pursuing a separate damages action, including the possibility that Vantage would vigorously contest both liability (notwithstanding the court's declaratory ruling) and the measure of damages;
• The impact of a damages action on the ongoing commercial relationship between Penterra and Vantage in the New England territory, to the extent Penterra wishes to maintain that relationship; and
• The potential for a negotiated resolution, either through a lump-sum settlement or through a credit against future amounts payable by Penterra under the EDA.
We would be happy to discuss these considerations with you and your team at your convenience.
3.4 Public Disclosure Considerations
As a publicly traded company listed on Nasdaq under the ticker symbol PTRA, Penterra should consider whether the resolution of this matter requires or warrants disclosure in its periodic filings with the Securities and Exchange Commission. Several aspects of the ruling may be relevant to Penterra's disclosure obligations.
First, the dismissal of Vantage's counterclaims — which alleged damages of approximately $35 million — eliminates a significant contingent liability that may have been previously disclosed or reserved for in Penterra's financial statements. To the extent that the litigation was described as a risk factor or contingent liability in Penterra's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, the favorable resolution should be reflected in Penterra's next periodic filing.
Second, the court's confirmation of Penterra's right to appoint a distributor for the tri-state area may have forward-looking commercial significance that warrants disclosure, particularly if the Meridian arrangement proceeds and is expected to have a material impact on revenues.
We recommend coordination with Penterra's independent auditor, Whitfield & Pryce LLP, and with the Company's internal finance team to assess the impact of the ruling on financial reporting, including any adjustments to previously recorded litigation reserves or accruals. We also recommend consultation with Penterra's securities counsel (whether internal or external) regarding the timing and content of any required disclosures.
3.5 Insurance Notification
Penterra should promptly notify its relevant insurance carriers of the favorable outcome in this matter, to the extent that prior notice of the litigation was provided to those carriers. Specifically:
• Atlantic Shield Insurance Co., Penterra's directors' and officers' liability insurer, should be informed of the dismissal of Vantage's counterclaims. This notification may affect any reserving or coverage assessments previously made by the carrier in connection with the litigation.
• Commonwealth Mutual Assurance Corp., Penterra's commercial general liability insurer, should also be notified. Depending on the terms of the applicable policy, the favorable resolution may entitle Penterra to a release of any reserves held by the carrier or may impact Penterra's future premium calculations.
We recommend that these notifications be made in writing and that copies of the Decision be provided to each carrier. Calderwood & Harkness can assist with the preparation of these notifications if desired.
4. Fees and Budget Update
We wish to provide a brief update on fees and costs in connection with this engagement. As you will recall, the engagement terms provide for hourly billing at Calderwood & Harkness's standard rates, subject to a seven percent (7%) discount, with an estimated budget range of $750,000 to $1,200,000 through trial. Because the matter resolved on summary judgment without the need for trial — including the elimination of trial preparation, witness preparation, expert testimony, and the trial itself — we are pleased to report that total fees and costs incurred in this matter are well within the estimated budget.
Final invoicing details, including a comprehensive summary of all fees and costs incurred through the conclusion of the engagement (or through the expiration of the appeal period, as applicable), will be provided separately by Priya Anand, the billing partner on this matter. Priya will be in touch with your office to coordinate the final billing process.
We wish to express our sincere appreciation for the collaborative and productive working relationship that we have enjoyed with you and the entire Penterra legal and commercial team throughout the course of this litigation. Your team's responsiveness in connection with discovery, document production, and factual development was instrumental in building the summary judgment record that led to this favorable result.
Conclusion
In sum, the court's Memorandum of Decision and Order represents a significant and favorable result for Penterra. The ruling confirms the Company's contractual rights, eliminates $35 million in counterclaim exposure, and clears the path for Penterra to proceed with its tri-state distribution strategy. While certain follow-up matters remain — including the monitoring of the appeal period, the finalization of the Meridian arrangement, the assessment of potential damages claims against Vantage, and the disclosure and insurance considerations discussed above — Penterra is in an excellent position as a result of this litigation.
The Calderwood & Harkness engagement team — Linda Osei, Priya Anand, Hannah Brinkley, and Patrick Gallagher — remains fully available to address any questions you may have regarding the Decision, the procedural next steps, or any of the recommended actions described in this letter. We would welcome the opportunity to schedule a call with you and, if you think it appropriate, with Dr. Marcus Lindholm and Steven Kapoor, to discuss the ruling and next steps in greater detail at a time that is convenient for your schedules. Please do not hesitate to reach out at your convenience.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Linda Osei Partner
1 Federal Street, 35th Floor Boston, Massachusetts 02110 Direct Dial: (617) 555-4237
Email: losei@calderwoodharkness.com
cc: Priya Anand, Esq., Calderwood & Harkness LLP Hannah Brinkley, Esq., Calderwood & Harkness LLP
Enclosure: Copy of the Court's Memorandum of Decision and Order dated July 15, 2022
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION. This letter and its enclosure are protected by the attorney-client privilege and the work product doctrine. This communication is intended solely for the use of the individual or entity to whom it is addressed. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, copying, or action taken in reliance on the contents of this communication is strictly prohibited. If you have received this communication in error, please notify Calderwood & Harkness LLP immediately at (617) 555-4200 and destroy all copies.

CALDERWOOD & HARKNESS LLP Attorneys at Law

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