PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
DOCUMENT PRESERVATION NOTICE — LITIGATION HOLD
FROM: Leonard Cross, Esq. Responsible Partner, Tax Department Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7200
Email: lcross@calderwoodharkness.com
DATE: June 6, 2022
TO:
Penterra Pharmaceuticals Corp.
Attention: Marcus Whitfield, Vice President, Global Tax
Deborah Staines, General Counsel Rajesh Iyer, Chief Financial Officer 2200 Independence Boulevard Princeton Junction, NJ 08550
Penterra Biopharma International DAC
Attention: Aidan Naughton, Managing Director
4th Floor, Claremont House Sandyford Business Park Dublin D18 K7T4, Ireland
Penterra Holdings Luxembourg S.à r.l.
Attention: Registered Office
14, rue Aldringen L-1118 Luxembourg
Penterra Manufacturing Ireland Ltd.
Attention: Registered Office
Unit 7, Ringaskiddy Industrial Estate Co. Cork T12 PX29, Ireland
RE: Document Preservation Notice — IRS Large Business & International Division Examination of Penterra Pharmaceuticals Corp., EIN 22-3741856, Tax Years 2017, 2018, 2019, 2020 (Exam Team ID: LB&I-NE-TP-2022-00641)
Calderwood & Harkness LLP Matter Number: 1018-00009
1. PURPOSE AND LEGAL OBLIGATION
Calderwood & Harkness LLP has been retained by Penterra Pharmaceuticals Corp. ("PPC") as outside tax counsel to defend PPC in connection with an examination opened by the Internal Revenue Service ("IRS") on May 16, 2022, as communicated via IRS Letter 2205-A (Notification of Examination). The engagement letter between Calderwood & Harkness LLP and PPC was fully executed on June 2, 2022. IRS Form 2848 (Power of Attorney and Declaration of Representative), authorizing Leonard Cross, Sylvia Hartwell, Garrett Simmons, and Leila Nazari of Calderwood & Harkness LLP to represent PPC before the IRS, was filed with the IRS CAF Unit on June 8, 2022, and is expected to be processed promptly thereafter.
The IRS examination covers PPC's federal income tax returns (Forms 1120) for tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020. The examination is being conducted by the IRS Large Business & International Division ("LB&I"), Northeast Transfer Pricing Practice. The IRS examination team is led by Supervisory Revenue Agent Gerald Meskill (Team Manager) and Lead Revenue Agent Patricia Dunleavy.
Based on the IRS's initial information document requests and opening conference, the examination focuses on the transfer pricing methodology used in intercompany transactions between PPC and its Irish subsidiary, Penterra Biopharma International DAC ("PBI"), including, but not limited to: (a) the cost-sharing arrangement ("CSA") between PPC and PBI; (b) the legacy intellectual property royalty rates applicable to certain pre-CSA intangible property; and (c) the platform contribution transaction ("PCT") valuation conducted in connection with the establishment of the CSA. These are significant, high-value issues that are expected to be subject to extensive IRS scrutiny and may ultimately give rise to administrative proceedings before the IRS Independent Office of Appeals and, potentially, litigation before the United States Tax Court.
This notice constitutes a formal litigation hold requiring the immediate preservation of all documents, data, and materials potentially relevant to the IRS examination and any subsequent administrative proceedings (including proceedings before IRS Appeals) or litigation (including U.S. Tax Court proceedings). This obligation to preserve is effective immediately upon receipt of this notice and is ongoing. It supersedes any existing document retention policies, document destruction schedules, or automated deletion protocols maintained by any of the entities identified herein. All such policies and schedules must be suspended immediately and indefinitely with respect to documents falling within the scope of this notice.
The obligation to preserve documents in connection with reasonably anticipated litigation is well established under federal law. Failure to preserve documents may result in adverse inferences, sanctions, spoliation findings, or other serious consequences in any subsequent administrative or judicial proceeding. Each recipient of this notice, and each custodian identified herein, has a personal and institutional obligation to ensure that no responsive documents are destroyed, altered, concealed, or otherwise made unavailable.
This notice should be read carefully and in its entirety. If you have any questions about the scope of this notice or your obligations hereunder, you should contact Leonard Cross or Garrett Simmons at Calderwood & Harkness LLP immediately.
2. SCOPE OF ENTITIES COVERED
This Document Preservation Notice applies to the following entities and to all of their respective officers, directors, employees, agents, consultants, and independent contractors who may possess, have access to, or have custody or control over documents or materials relevant to the subject matter described herein:
1. Penterra Pharmaceuticals Corp. ("PPC")
PPC is a corporation organized under the laws of the State of Delaware, publicly traded on the Nasdaq Global Select Market under the ticker symbol "PPCA," and headquartered at 2200 Independence Boulevard, Princeton Junction, New Jersey 08550. PPC is the U.S. parent entity and the filer of the federal income tax returns under examination. This hold applies to all PPC departments, including without limitation the Tax Department, Legal Department, Finance Department, Research & Development, Commercial Operations, Regulatory Affairs, and Information Technology, as well as to all officers and directors of PPC.
2. Penterra Biopharma International DAC ("PBI")
PBI is a Designated Activity Company organized under the laws of Ireland, with its registered office at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. PBI's Irish Tax Reference Number is 3218764T. PBI functions as the intellectual property-holding company and principal for non-Americas commercialization of PPC's pharmaceutical products. As of December 31, 2020, PBI employed approximately 185 persons in Ireland. PBI is a controlled foreign corporation ("CFC") for U.S. federal income tax purposes and is a party to the CSA and the legacy IP license agreement at issue in the examination. This hold applies to all PBI personnel and to all PBI records, wherever located.
3. Penterra Holdings Luxembourg S.à r.l. ("PHL")
PHL is a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg, with its registered office at 14, rue Aldringen, L-1118 Luxembourg. PHL's Luxembourg Registre de Commerce et des Sociétés ("RCS") Number is B 168452. PHL serves as an intermediate holding entity and is the 100% owner of PBI. PHL is treated as a disregarded entity for U.S. federal income tax purposes. This hold applies to all PHL directors, officers, and any managers or service providers who may possess relevant documents.
4. Penterra Manufacturing Ireland Ltd. ("PMI")
PMI is an Irish private limited company with its registered office at Unit 7, Ringaskiddy Industrial Estate, Co. Cork T12 PX29, Ireland. PMI's Companies Registration Office ("CRO") Number is 512347. PMI operates as a contract manufacturer under a cost-plus arrangement with PBI, manufacturing pharmaceutical products for non-Americas markets. As of December 31, 2020, PMI employed approximately 620 persons. This hold applies to all PMI directors, officers, and employees, and to all PMI records, wherever located.
For the avoidance of doubt, this hold applies to all records in the possession, custody, or control of the foregoing entities and their personnel, regardless of whether such records are stored in the United States, Ireland, Luxembourg, or any other jurisdiction.
3. TAX YEARS AND SUBJECT MATTER
3.1 Tax Years at Issue
The IRS examination covers PPC's federal income tax returns (Forms 1120) for the following tax years, each ending December 31:
• Tax Year 2017
• Tax Year 2018
• Tax Year 2019
• Tax Year 2020
PPC uses a calendar fiscal year ending December 31 for both financial reporting and federal income tax purposes.
3.2 Subject Matter
The subject matter of this preservation notice encompasses all aspects of intercompany transfer pricing among PPC, PBI, PHL, and PMI during the tax years at issue and for any prior periods relevant to the establishment, negotiation, or implementation of the intercompany arrangements described below. The subject matter includes, but is not limited to, the following:
a. Cost-Sharing Arrangement ("CSA"). The CSA between PPC and PBI, effective July 1, 2012, under which PBI co-funds qualified research and development costs incurred by PPC in exchange for rights to exploit PPC-developed intellectual property outside the Americas. During the tax years at issue, PBI's cost-sharing percentages and corresponding obligations were as follows:
b. Platform Contribution Transaction ("PCT"). The PCT payment of $312 million made by PBI to PPC on July 1, 2012, in connection with the establishment of the CSA, representing compensation for PBI's buy-in to pre-existing PPC intangible property contributed to the CSA.
c. Legacy intellectual Property License Agreement. The legacy intellectual property license agreement between PPC (as licensor) and PBI (as licensee), under which PBI pays a royalty rate of 4.5% of non-Americas net sales for the right to commercialize certain pre-CSA compounds outside the Americas. Non-Americas net sales for legacy compounds during the tax years at issue were as follows:
d. Contract Manufacturing Arrangement. The contract manufacturing arrangement between PBI and PMI, under which PMI manufactures pharmaceutical products for PBI at a transfer price equal to cost plus an 8% markup.
e. PBI Functions, Assets, and Risks. All matters relating to PBI's functions, assets, and risks, including the performance of Development, Enhancement, Maintenance, Protection, and Exploitation ("DEMPE") functions with respect to PPC intellectual property exploited outside the Americas, PBI's economic substance in Ireland, and the allocation of risks under the intercompany arrangements.
f. PBI Economic Substance. All evidence of PBI's economic substance in Ireland, including without limitation: (i) personnel (52 employees at establishment in 2012, growing to 185 employees by 2020); (ii) board governance (42 board meetings during 2017–2020, all held in Dublin); (iii) office space (approximately 18,000 square feet at Sandyford Business Park, Dublin); (iv) regulatory expenditures (€47.2 million cumulative during 2017–2020); and (v) independent pricing decisions across 68 country markets.
g. Product-Level Revenue Data. Revenue data for PPC's key pharmaceutical products, including Veritaxol (oncology), Imvara (immunology), and Cerulon (rare disease), including global and non-Americas net sales for each tax year at issue.
h. Valuations, Projections, and Economic Analyses. Any and all valuations, revenue projections, financial models, discounted cash flow analyses, comparable uncontrolled transaction analyses, comparable profits method analyses, or other economic analyses related to the CSA, the PCT, the legacy IP royalty rate, or the contract manufacturing markup.
4. DEFINITION OF "DOCUMENTS" AND "MATERIALS"
For purposes of this preservation notice, "documents" and "materials" are defined in the broadest possible sense and include, without limitation, all of the following categories, in whatever medium or format they exist:
4.1 Paper Documents
Originals and copies of all memoranda, correspondence, letters, notes, reports, analyses, studies, spreadsheets, financial statements, tax returns, workpapers, presentations, board minutes, board resolutions, committee agendas, contracts, agreements, amendments, schedules, exhibits, side letters, invoices, receipts, purchase orders, handwritten notes, notepads, journals, calendars, day planners, and any other paper records, whether formal or informal.
4.2 Electronic Documents and Data
All emails (including all attachments, headers, routing information, and metadata), text messages (SMS and MMS), instant messages, chat messages (including messages on internal messaging platforms such as Meridian Solutions, Northgate Data Systems, or any similar platform used by PPC, PBI, PHL, or PMI), voicemails (including stored voicemail recordings and transcriptions), calendar entries, electronic files in all formats (including Microsoft Word, Excel, Northgate Services Inc., PDF, CSV, XML, and any proprietary formats), databases, accounting system data, enterprise resource planning ("ERP") records, financial system outputs and reports, scanned documents, electronic images, audio recordings, and video recordings.
4.3 Financial and Accounting Records
General ledger entries, intercompany account statements, intercompany invoices, transfer pricing calculations and supporting workpapers, royalty payment records and remittance documentation, cost pool allocations and supporting schedules, research and development expenditure records (including R&D cost categorization and allocation methodologies), revenue data by product, geography, and territory, bank statements (including all account statements and transaction records maintained at Glenmore Bank Ireland plc for PBI), cash flow statements, balance sheets, income statements, and all tax provision workpapers (including ASC 740 workpapers).
4.4 Tax-Related Documents
Federal income tax returns (Forms 1120) for PPC for tax years 2017, 2018, 2019, and 2020, together with all schedules, attachments, and supporting workpapers; Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) filed with respect to PBI and PHL for tax years 2017, 2018, 2019, and 2020; all transfer pricing documentation and reports prepared under the standards set forth in Internal Revenue Code ("IRC") § 6662(e) and the related Treasury Regulations (Treas. Reg. § 1.6662-6), including any contemporaneous documentation prepared by Crestfield & Associates LLP (engagement partner: Martin Ogilvy; transfer pricing partner: Susan Lam); all supporting workpapers, studies, economic analyses, benchmarking studies, comparability analyses, and any other materials related to PPC's transfer pricing positions; and any correspondence with or work product prepared by Crestfield & Associates LLP in connection with the foregoing.
4.5 Corporate Governance Documents
Board minutes, board resolutions, committee minutes (including audit committee and finance committee), committee charters, corporate governance policies, board presentations, board packages, and all governance documents for PPC, PBI, PHL, and PMI for the relevant preservation period, including records of any delegations of authority from PPC to PBI with respect to non-Americas operations.
4.6 Intercompany Agreements
The CSA agreement effective July 1, 2012, and all amendments, supplements, side letters, or modifications thereto; the legacy intellectual property license agreement between PPC and PBI and all amendments thereto; the contract manufacturing agreement between PBI and PMI and all amendments thereto; any intercompany service agreements among PPC, PBI, PHL, and PMI; and all related schedules, exhibits, appendices, and ancillary documents.
4.7 Personnel Records
Organizational charts, headcount data, employee lists and rosters, role descriptions and job specifications, employment contracts (particularly for PBI key personnel, including Managing Director Aidan Naughton and other members of PBI's senior management team), compensation records, performance reviews, and travel records for personnel traveling between the United States and Ireland (including travel itineraries, expense reports, and visa or immigration records).
4.8 Regulatory and Commercial Documents
Regulatory submissions, marketing authorization applications and approvals, pricing dossiers, reimbursement applications, distribution agreements, supply agreements, co-promotion agreements, market strategy documents, commercial plans, launch plans, brand plans, and any other documents relating to the commercialization of PPC products in non-Americas territories, including documents relating to PBI's independent pricing decisions across 68 country markets.
4.9 Real Property and Leasing Documents
PBI's lease for office space at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland (approximately 18,000 square feet), and any related lease amendments, renewals, subleases, or correspondence with the landlord.
4.10 Third-Party Communications
All correspondence, communications, reports, analyses, and work product exchanged with or prepared by the following third parties, to the extent such materials relate to the subject matter described in this notice:
• Crestfield & Associates LLP (Martin Ogilvy, Engagement Partner; Susan Lam, Transfer Pricing Partner) — PPC's independent auditor and preparer of transfer pricing documentation;
• Thornbury & Keogh (Ciarán Thornbury, Lead Partner, 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland) — Irish tax advisors to PBI and PMI;
• Glenmore Bank Ireland plc — PBI's principal Irish bank; and
• Any other advisors, consultants, counterparties, or third parties with whom any of the covered entities has communicated regarding the matters described herein.
4.11 Backup Media
All backup tapes, disaster recovery files, archive files, and any other backup or archival media containing any of the foregoing categories of documents or data, regardless of the storage medium or location.
4.12 Metadata. All metadata associated with electronic documents must be preserved intact. No documents should be printed, converted, or reformatted in any manner that would strip, alter, or destroy metadata. Documents should be preserved in their native format to the greatest extent possible.
5. TIME PERIOD FOR PRESERVATION
The preservation obligation under this notice covers all documents and materials dated, created, modified, sent, received, or otherwise generated during the period from January 1, 2010 through the present date and continuing forward until this hold is formally released in writing by Calderwood & Harkness LLP.
The preservation period extends back to January 1, 2010 — which is prior to PBI's incorporation on March 15, 2012, and prior to the CSA effective date of July 1, 2012 — in order to capture all planning, formation, negotiation, structuring, and implementation documents relating to the establishment of PBI, PHL, PMI, the CSA, the PCT, the legacy IP license, and the contract manufacturing arrangement. Documents from this earlier period are critical to establishing the business rationale, economic substance, and arm's-length nature of the intercompany arrangements.
The preservation period extends through the present date and forward on a continuing basis in order to capture all ongoing examination-related communications, document requests from the IRS, responses thereto, and any documents created during the course of the defense.
Note: PPC was not a participant in the IRS Compliance Assurance Process ("CAP") for the tax years at issue (2017–2020), and accordingly no CAP-related preservation obligations apply.
6. SPECIFIC CATEGORIES OF DOCUMENTS TO PRESERVE
In addition to the general categories described in Section 4 above, the following specific categories of documents are of particular importance and must be preserved. This list is illustrative and not exhaustive; it does not limit the general preservation obligation set forth in Sections 4 and 5.
6.1 CSA and PCT Documents
(a) The Cost-Sharing Arrangement agreement effective July 1, 2012, between PPC and PBI, together with all amendments, supplements, schedules, exhibits, and side letters thereto.
(b) The Platform Contribution Transaction ("PCT") valuation report and all supporting workpapers documenting and supporting the $312 million payment made by PBI to PPC on July 1, 2012, including all discounted cash flow models, comparable uncontrolled transaction analyses, income-based valuation models, and any other economic methodologies used to determine the PCT payment amount.
(c) All revenue projections, financial forecasts, probability-weighted projections, and product-level forecasts used to determine the reasonably anticipated benefit shares ("RAB shares") for purposes of the CSA.
(d) Cost pool calculations for qualified research and development costs for each tax year at issue ($487.3 million in 2017, $523.8 million in 2018, $561.2 million in 2019, and $598.4 million in 2020), including all supporting documentation for the inclusion or exclusion of specific R&D expenditures from the cost pool.
(e) Annual cost-sharing percentage calculations and all supporting data, including the methodologies used to determine PBI's RAB share and the resulting cost-sharing percentages (38.2% in 2017, 39.6% in 2018, 41.1% in 2019, and 42.7% in 2020).
(f) Any internal memoranda, presentations, board materials, management analyses, or other documents related to the CSA structure, its establishment, its ongoing administration, or any proposed or contemplated amendments thereto.
6.2 Royalty Agreement and Legacy IP Documents
(a) The legacy intellectual property license agreement between PPC and PBI establishing the 4.5% royalty rate on non-Americas net sales, together with all amendments, schedules, and exhibits thereto.
(b) Non-Americas net sales data for all legacy compounds for each tax year at issue, broken down by product, territory, and reporting period.
(c) Royalty payment calculations, payment records, wire transfer confirmations, intercompany invoices, and all other documentation of royalty payments from PBI to PPC.
(d) Any benchmarking studies, comparability analyses, or economic analyses conducted in connection with the establishment, review, or justification of the 4.5% royalty rate.
(e) Any third-party license agreements, heads of terms, or term sheets used as comparables in determining or benchmarking the royalty rate, whether identified by PPC's personnel, Crestfield & Associates LLP, or any other advisor.
6.3 PBI Substance and Operations Documents
(a) PBI employee records, including headcount data showing the progression from 52 employees at establishment in 2012 to 185 employees as of December 31, 2020, employee rosters, organizational charts, job descriptions, and records of recruitment and hiring.
(b) PBI board minutes for all 42 board meetings held during 2017–2020, together with all board packages, presentations, and supporting materials provided to the PBI board of directors in connection with such meetings, and records confirming that all such meetings were held in Dublin, Ireland.
(c) All evidence of PBI's independent decision-making authority, including records of decisions made by PBI's board or management without direction or approval from PPC, delegation of authority matrices, and records of PBI management's exercise of autonomous judgment on commercial, regulatory, and operational matters.
(d) PBI's regulatory expenditure documentation, including records of the €47.2 million in cumulative regulatory expenditures during 2017–2020, broken down by year, country, product, and type of expenditure.
(e) All records of PBI's pricing decisions across 68 country markets in non-Americas territories, including pricing committee minutes, pricing analyses, tender submissions, reimbursement negotiations, and correspondence with local regulatory or health technology assessment bodies.
(f) PBI's office lease at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland (approximately 18,000 square feet), and all related documents evidencing PBI's physical presence, including utility records, facility management records, and building access logs.
(g) PBI's banking records maintained at Glenmore Bank Ireland plc, including all account opening documentation, account statements, wire transfer records, and cash management arrangements.
(h) PBI's capital expenditure records, information technology investment records, and any records of PBI's procurement of independent systems, infrastructure, or technology platforms separate from PPC.
6.4 PMI Manufacturing Documents
(a) The contract manufacturing agreement between PBI and PMI providing for a cost-plus-8% transfer pricing methodology, together with all amendments, schedules, and exhibits thereto.
(b) Manufacturing output data, including production volumes, batch records, capacity utilization data, and all invoicing records reflecting intercompany charges from PMI to PBI.
(c) PMI personnel records, including headcount data (620 employees as of December 31, 2020), organizational charts, and records of manufacturing and quality personnel.
6.5 Tax Returns and Compliance Documents
(a) PPC's federal income tax returns (Forms 1120) for tax years 2017, 2018, 2019, and 2020, together with all schedules, elections, and attachments thereto.
(b) Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) filed by PPC with respect to PBI and PHL for tax years 2017, 2018, 2019, and 2020, together with all supporting schedules and computations.
(c) All transfer pricing documentation prepared by Crestfield & Associates LLP under the contemporaneous documentation standards of IRC § 6662(e) and Treas. Reg. § 1.6662-6, including the full transfer pricing reports, all supporting analyses and appendices, and all communications with Crestfield & Associates LLP regarding the preparation of such documentation.
(d) FIN 48 / ASC 740-10 workpapers and all documentation of uncertain tax position reserves, including the $62.4 million pre-settlement reserve recorded in PPC's financial statements in connection with the Irish intellectual property structure and the intercompany transfer pricing positions.
(e) Any tax provision analyses, effective tax rate reconciliations, or other financial reporting analyses related to the Irish intellectual property structure, the CSA, the PCT, or the intercompany arrangements.
(f) PBI's Irish corporation tax returns for all relevant years and all documentation related to PBI's Knowledge Development box ("KDB") claims at the reduced rate of 6.25% (effective for fiscal years beginning on or after January 1, 2016), including all qualifying asset calculations and supporting analyses.
6.6 Product Revenue and Financial Data
(a) Revenue data by product for PPC's key pharmaceutical products for all tax years at issue, including:
(b) Territorial revenue splits for Americas versus non-Americas for all products and all tax years at issue, including supporting documentation for the allocation of revenue between territories.
(c) PPC consolidated financial data, including for fiscal year 2020: total revenue of $6.82 billion and pre-tax income of $1.47 billion.
(d) PBI statutory financial statements filed in Ireland, including for fiscal year 2020: total revenue of €2.14 billion and pre-tax income of €1.06 billion.
6.7 Credit Facility and Investor-Related Documents
(a) All documents related to PPC's $1.5 billion revolving credit facility with Hargrove National Bank, N.A. (administrative agent: Christine Bellucci, Senior Vice President), including the credit agreement, all amendments thereto, and any tax-indemnity covenants, material-tax-event covenants, or other provisions that may be triggered by an adverse outcome in the IRS examination.
(b) All communications with Ridgeview Capital Management LP (8.3% institutional shareholder; Managing Partner: Douglas Everett) regarding tax reserves, the Irish intellectual property structure, or any matters related to the IRS examination, transfer pricing positions, or potential tax liabilities.
(c) All PPC filings with the U.S. Securities and Exchange Commission ("SEC"), including Forms 10-K and 10-Q, that contain disclosures relating to transfer pricing, intercompany arrangements, tax contingencies, uncertain tax positions, or the Irish intellectual property structure, together with all drafts thereof and all internal communications regarding such disclosures.
7. SPECIFIC PRESERVATION INSTRUCTIONS
7.1 Immediate Actions Required
Each entity receiving this notice must take the following actions immediately upon receipt:
(a) Suspend Document Destruction. Immediately suspend any routine document destruction or deletion schedules, including any auto-delete policies, auto-archive policies, or automated purge protocols, with respect to all custodians and systems identified herein. No documents or data falling within the scope of this notice may be destroyed, deleted, overwritten, or otherwise disposed of, regardless of whether such destruction would otherwise be authorized under existing document retention policies.
(b) Preserve Backup Media. Identify and preserve all backup tapes, disaster recovery media, and archival storage media that may contain documents or data falling within the scope of this notice. No backup tapes or media should be recycled, overwritten, or degaussed until further notice.
(c) Notify IT Departments. The information technology departments at PPC (Princeton Junction, NJ), PBI (Dublin, Ireland), PHL (Luxembourg), and PMI (Cork, Ireland) must be notified of this preservation hold immediately and must take all necessary steps to preserve electronic data, including implementing technical measures to prevent the deletion or alteration of relevant data.
(d) Issue Custodian Notifications. Issue hold notifications to all custodians listed in Section 8 of this notice. Each custodian must be informed of his or her individual obligation to preserve all documents and data falling within the scope of this notice.
7.2 Email and Electronic Communications
(a) All email accounts (including primary accounts, secondary accounts, shared mailboxes, and distribution lists) of the custodians identified in Section 8 must be placed on legal hold within the applicable email system or archiving platform.
(b) All auto-delete policies for email (including policies that automatically purge emails from servers or archive systems after a specified retention period) must be suspended for all identified custodians.
(c) Journaling, archiving, or litigation hold solutions must be enabled or confirmed as operational for all custodian accounts. If the relevant entity uses Ashgrove Software, Crestline Software, or a comparable platform, in-place hold or litigation hold functionality must be activated for all identified custodian mailboxes.
(d) Personal devices (including personal mobile phones, tablets, laptops, and home computers) used by custodians for business communications, including emails, text messages, or messaging application communications, are included within the scope of this hold and must be preserved.
7.3 Cloud and SaaS Systems
(a) Any cloud-hosted data storage, document management systems (such as Aldermere Systems, Cobalt Ridge Systems, Hollowell Health IT, box, or Larkspur Technologies), or collaboration platforms (such as Northgate Data Systems, Meridian Solutions, or similar tools) used by PPC, PBI, PHL, or PMI must be placed on hold to prevent the deletion or modification of documents and data falling within the scope of this notice.
(b) All SaaS-based financial systems, enterprise resource planning ("ERP") systems (including Hollowell & Co., Ridgeline Industries, or any comparable system used by the covered entities), and any other cloud-hosted applications that contain financial, accounting, tax, or operational data must retain all data for the relevant preservation period. No data purges, archival deletions, or system migrations that could result in data loss may be undertaken without prior authorization from Calderwood & Harkness LLP.
7.4 Physical Documents
(a) All physical files maintained in offices at Princeton Junction, NJ (PPC), Sandyford Business Park, Dublin (PBI), 14 rue Aldringen, Luxembourg (PHL), and Ringaskiddy, Co. Cork (PMI) that contain documents within the scope of this notice must be secured and safeguarded.
(b) No physical documents, files, binders, notebooks, or other tangible records that fall within the scope of this notice may be discarded, shredded, recycled, relocated, or otherwise disposed of without the prior written authorization of Calderwood & Harkness LLP.
(c) If any physical documents are at risk of damage or destruction due to environmental conditions, renovation, or office relocation, the preservation coordinator for the relevant entity must contact Calderwood & Harkness LLP immediately to arrange for appropriate safeguarding measures.
8. KEY CUSTODIANS
The following is a list of individuals whose files, devices, and communications must be preserved. This list represents the minimum set of custodians and is not exhaustive. Additional custodians may be identified as the examination progresses, and supplemental hold notices will be issued as appropriate.
8.1 Penterra Pharmaceuticals Corp. (PPC)
• Catherine Falk — Chief Executive Officer
• Rajesh Iyer — Chief Financial Officer
• Deborah Staines — General Counsel
• Marcus Whitfield — Vice President, Global Tax
• All members of PPC's Tax Department
• All members of PPC's Legal Department with involvement in the intercompany arrangements, Irish operations, or the IRS examination
• All members of PPC's Finance Department with involvement in intercompany accounting, transfer pricing, or financial reporting related to the Irish entities
• All members of PPC's Research & Development Department with involvement in R&D cost pool calculations, CSA administration, or coordination with PBI
• All members of PPC's Commercial Operations Department with involvement in non-Americas commercial strategy, territorial revenue allocation, or coordination with PBI
8.2 Penterra Biopharma International DAC (PBI)
• Aidan Naughton — Managing Director
• All PBI employees (approximately 185 as of December 31, 2020) who were involved in regulatory affairs, commercial strategy, supply chain management, medical affairs, intellectual property management, finance, or any other function relevant to PBI's operations, decision-making authority, or economic substance
• All current and former members of PBI's board of directors for the period 2017–2020
8.3 Penterra Holdings Luxembourg S.à r.l. (PHL)
• All directors, officers, and managers of PHL, including any persons providing corporate governance or administrative services to PHL
8.4 Penterra Manufacturing Ireland Ltd. (PMI)
• The managing director of PMI
• All finance, operations, and manufacturing management personnel involved in the contract manufacturing arrangement with PBI, including persons responsible for cost accounting, invoicing, and transfer pricing compliance
Each entity is requested to compile and provide to Calderwood & Harkness LLP, within ten (10) business days of receipt of this notice, a complete list of all custodians whose documents are being preserved pursuant to this hold, together with contact information for each such custodian and a description of the custodian's role and the categories of documents in his or her possession, custody, or control.
9. COORDINATION WITH THIRD-PARTY ADVISORS
Certain third-party advisors and service providers possess documents and materials that are relevant to the IRS examination and that must be preserved. Calderwood & Harkness LLP will coordinate the issuance of preservation notices to these third parties as follows:
Crestfield & Associates LLP. Crestfield & Associates LLP (Martin Ogilvy, Engagement Partner; Susan Lam, Transfer Pricing Partner) serves as PPC's independent auditor and as the preparer of PPC's transfer pricing documentation for the tax years at issue. Crestfield & Associates LLP should be separately notified to preserve all workpapers, analyses, benchmarking studies, comparability databases, draft and final reports, and communications related to PPC's transfer pricing positions for tax years 2017–2020, including all materials related to the CSA, the PCT, the legacy IP royalty rate, and the contract manufacturing arrangement. Calderwood & Harkness LLP will prepare and issue this notification in coordination with PPC's Tax Department.
Thornbury & Keogh. Thornbury & Keogh (Ciarán Thornbury, Lead Partner, 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland) serves as the Irish tax advisors to PBI and PMI. Thornbury & Keogh should preserve all files, workpapers, correspondence, and analyses related to PBI's Irish corporation tax compliance, Knowledge Development box claims, transfer pricing compliance under Irish law, and any related matters for all relevant years. Calderwood & Harkness LLP will coordinate this notification through Leila Nazari, who will serve as the primary point of contact for Irish entity coordination.
Glenmore Bank Ireland plc. Glenmore Bank Ireland plc is PBI's principal Irish bank. PBI should ensure that all bank records, account statements, wire transfer records, and transaction documentation maintained by Glenmore Bank Ireland plc are requested, obtained, and preserved for the full preservation period. PBI's finance team should coordinate with Glenmore Bank Ireland plc to ensure that no records are purged or destroyed.
10. DURATION OF HOLD
This Document Preservation Hold remains in full force and effect until Calderwood & Harkness LLP provides written notice of its release. No oral communications, informal assurances, or partial releases shall be deemed to modify or terminate this hold.
The hold will remain in effect throughout the entirety of the IRS examination, any subsequent proceedings before the IRS Independent Office of Appeals, and any subsequent litigation, including potential proceedings before the United States Tax Court or any other court of competent jurisdiction. Given that IRS examinations of this nature and complexity frequently extend for several years and may give rise to administrative and judicial proceedings that continue for many years thereafter, recipients should anticipate that this hold will remain in effect for an extended period.
No documents falling within the scope of this notice may be destroyed, altered, modified, deleted, overwritten, or otherwise disposed of until Calderwood & Harkness LLP has issued a written release of this hold. Any questions regarding the continued applicability of this hold should be directed to Leonard Cross at Calderwood & Harkness LLP.
11. ACKNOWLEDGMENT AND COMPLIANCE
11.1 Acknowledgment of Receipt
Each recipient of this notice must acknowledge receipt within five (5) business days by providing a signed acknowledgment to Leonard Cross at Calderwood & Harkness LLP, using the Acknowledgment Form attached hereto as Attachment A. The signed acknowledgment may be returned by email (scanned PDF) to lcross@calderwoodharkness.com, with a copy to gsimmons@calderwoodharkness.com and lnazari@calderwoodharkness.com, or by overnight courier to the address below.
11.2 Designation of Preservation Coordinator
Each entity must designate a preservation coordinator who will be responsible for overseeing compliance with this notice within the entity. The initial preservation coordinators are as follows, unless the entity designates a different individual:
• PPC: Marcus Whitfield, Vice President, Global Tax, or his designee
• PBI: Aidan Naughton, Managing Director, or his designee
• PHL: A designated officer or manager of PHL, to be identified in the acknowledgment
• PMI: A designated officer or manager of PMI, to be identified in the acknowledgment
11.3 Confirmation of Implementation
The preservation coordinator for each entity must confirm in writing within fifteen (15) business days of receipt of this notice that all preservation steps required by this notice have been implemented, including the suspension of document destruction schedules, the issuance of custodian notifications, the activation of email and data holds, and the securing of physical documents. Such confirmation should be addressed to Leonard Cross at Calderwood & Harkness LLP.
11.4 Questions Regarding Scope
Any questions regarding the scope of this hold, whether specific documents or categories of documents fall within its scope, or how to implement any aspect of this notice should be directed to:
Leonard Cross, Responsible Partner Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7200
Email: lcross@calderwoodharkness.com
Garrett Simmons, Lead Associate Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 864-7218