1018-00009 · Client 1018 · Engagement

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 546-8000 Facsimile: (212) 546-8001

Tax Practice Group 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 492-7700 Facsimile: (215) 492-7701

www.calderwoodharkness.com

June 2, 2022

Mr. Marcus Whitfield Vice President, Global Tax Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550

Ms. Deborah Staines General Counsel Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550

Re: Engagement of Calderwood & Harkness LLP — IRS Transfer Pricing Examination Defense Matter Number: 1018-00009 Client: Penterra Pharmaceuticals Corp. (EIN: 22-3741856) Tax Years Under Examination: 2017, 2018, 2019, 2020

Dear Mr. Whitfield and Ms. Staines:

1. Introduction and Purpose

Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm its engagement by Penterra Pharmaceuticals Corp. ("PPC" or the "Company"), a Delaware corporation headquartered in Princeton Junction, New Jersey, and publicly traded on the Nasdaq Stock Market (ticker symbol: PPCA), as outside tax counsel in connection with the matters described herein.

This engagement letter (the "Letter") sets forth the terms and conditions upon which C&H will represent PPC in connection with the Internal Revenue Service ("IRS") Large Business & International Division ("LB&I") examination of PPC's transfer pricing methodology for federal income tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020 (collectively, the "Tax Years" or "TY 2017–2020"). As you are aware, PPC received an initial contact letter from the IRS (Letter 2205-A) dated May 16, 2022, bearing IRS Exam Team identification number LB&I-NE-TP-2022-00641 (the "Examination"). The Examination is supervised by Supervisory Revenue Agent Gerald Meskill and led by Lead Revenue Agent Patricia Dunleavy.

We understand that the IRS has identified PPC's intercompany transfer pricing arrangements as a focus area for the Examination, and that the LB&I team includes at least one IRS economist. Given the magnitude of the intercompany transactions at issue, the complexity of the applicable transfer pricing regulations under Internal Revenue Code ("IRC") Section 482, and the potential for significant proposed adjustments, PPC has determined that engagement of experienced outside tax controversy counsel is warranted.

This Letter supersedes any prior discussions, proposals, or correspondence between C&H and PPC regarding this engagement and constitutes the entire agreement between the Firm and the Company with respect to the representation described herein. Any modifications to the terms of this Letter must be agreed to in writing by both parties.

2. Scope of Representation

2.1 General Scope

C&H will serve as outside tax counsel to PPC in defending against the IRS examination challenging the transfer pricing methodology employed in PPC's intercompany arrangements with its Irish subsidiary, Penterra Biopharma International Designated Activity Company ("PBI"), an Irish-incorporated entity. The defense will also encompass the intercompany transactions between PPC and PBI's wholly owned subsidiaries, Penterra Holdings Limited ("PHL") and Penterra Manufacturing Ireland Limited ("PMI"), to the extent such transactions are encompassed within the IRS's examination scope.

The Examination concerns, in particular, the qualified cost-sharing arrangement ("CSA") entered into between PPC and PBI effective July 1, 2012, as amended, including the platform contribution transaction ("PCT") valuations relating to pre-existing intangible property contributed by PPC to the CSA at its inception, the ongoing cost-sharing payments made between PPC and PBI, and the reasonably anticipated benefits ("RAB") shares used to allocate intangible development costs. Additionally, the Examination concerns the intercompany royalty rates for legacy intellectual property licensed by PPC to PBI under the PPC-PBI License Agreement dated January 15, 2010, as amended, which covers certain pharmaceutical compounds and related know-how developed by PPC prior to the formation of the CSA.

The IRS is examining PPC's federal income tax returns (Forms 1120) for TY 2017, 2018, 2019, and 2020, and the Examination may extend to any schedules, attachments, or informational returns associated therewith, including but not limited to Schedule M-3, Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations), and Form 8865 (Return of U.S. Persons with Respect to Certain Foreign Partnerships), to the extent relevant to the transfer pricing issues under review.

2.2 Specific Services

C&H will provide the following services in connection with the Examination, subject to the limitations set forth in Section 2.3 below:

(a) IDR Responses. Preparation of and strategy for responses to Information Document Requests ("IDRs") issued by the IRS examination team, including analysis of the legal bases for the IRS's requests, identification of responsive documents and data, coordination with PPC's internal teams to gather information, and drafting of written narrative responses and cover letters as appropriate. C&H will manage the IDR process in accordance with the IRS's current IDR enforcement procedures set forth in LB&I Directive LB&I-04-0118-005 and subsequent guidance.

(b) Functional and Economic Analyses. Preparation and coordination of functional and economic analyses supporting PPC's transfer pricing positions, including the development of legal and factual arguments to defend PPC's chosen methods under the best-method analysis required by Treasury Regulation § 1.482-1(c).

(c) Coordination with Crestfield & Associates LLP. Coordination with PPC's independent auditor and transfer pricing documentation preparer, Crestfield & Associates LLP ("Crestfield"), regarding federal income tax return data, contemporaneous transfer pricing documentation prepared under IRC § 6662(e) and Treasury Regulation § 1.6662-6, and related workpapers, analyses, and databases used in the preparation of PPC's transfer pricing studies for TY 2017–2020.

(d) Irish Tax Advisor Coordination. Coordination with PPC's Irish tax advisors, Thornbury & Keogh ("T&K"), regarding dual-jurisdiction aspects of the defense, including Irish Revenue considerations, PBI substance documentation, and potential competent authority or mutual agreement procedure implications under the Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the "U.S.-Ireland Income Tax Treaty").

(e) Kovel Arrangement — Expert Retention. Retention and direction of transfer pricing economic consultants under the attorney-client privilege, pursuant to an arrangement consistent with the principles established in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961) (a "Kovel arrangement"), as more fully described in Section 6 below.

(f) IRS Conferences. Attendance at and representation during IRS conferences, including the opening conference, any mid-examination conferences, progress meetings, and meetings with IRS economists, IRS valuation specialists, or attorneys from the IRS Office of Chief Counsel.

(g) NOPA and 30-Day Letter Review. Review and analysis of any Notice of Proposed Adjustment ("NOPA") issued by the IRS examination team, and review and analysis of any 30-Day Letter (Letter 950 or equivalent) issued upon the conclusion of the examination.

(h) IRS Appeals Protest. Preparation and filing of a formal Protest to the IRS Independent Office of Appeals (the "Appeals Division"), if necessary, including the preparation of a detailed written protest addressing the factual, legal, and economic bases for PPC's positions.

(i) Appeals Representation. Representation before the IRS Appeals Division, including preparation for and attendance at Appeals conferences, submission of supplemental legal and economic analyses, and negotiation of any resolution with the Appeals Officer and any Appeals economists assigned to the case.

(j) Settlement Negotiation. Negotiation of any settlement or closing agreement, including preparation and review of IRS Form 906 (Closing Agreement on Final Determination Covering Specific Matters), and analysis of the terms and conditions of any proposed resolution.

(k) Ancillary Analyses. Analysis of ancillary issues arising in connection with the Examination, including but not limited to:

(i) IRC § 6662(e) transfer pricing penalty exposure under the substantial valuation misstatement and gross valuation misstatement provisions, and the development of a reasonable-cause defense under IRC § 6664(c) and Treasury Regulation § 1.6664-4;

(ii) Financial reporting considerations under ASC 740-10-25 (formerly FIN 48), including analysis of whether PPC's transfer pricing positions satisfy the "more-likely-than-not" recognition threshold and the assessment of measurement-step reserves;

(iii) Securities and Exchange Commission ("SEC") disclosure considerations arising from the Examination, including potential disclosure obligations under SEC Regulation S-K, Item 103 (Legal Proceedings) and Item 303 (Management's Discussion and Analysis);

(iv) Credit facility covenant implications, including analysis of any financial covenant impacts that may arise from proposed IRS adjustments to taxable income;

(v) Potential competent authority and mutual agreement procedure ("MAP") considerations under Article 25 of the U.S.-Ireland Income Tax Treaty, including the advisability and timing of a competent authority request to the IRS and coordination with T&K regarding a corresponding application to the Irish Revenue Commissioners; and

(vi) Analysis of the interaction between any proposed IRC § 482 adjustments and the Global Intangible Low-Taxed Income ("GILTI") provisions of IRC § 951A and the Base Erosion and Anti-Abuse Tax ("BEAT") provisions of IRC § 59A, including the potential for cascading effects on PPC's overall tax liability.

(l) Privilege Protocols. Preparation of document preservation notices and privilege protocols, as more fully described in Section 8 below.

2.3 Limitations on Scope

The following matters are expressly excluded from the scope of this engagement:

(a) Litigation. This engagement does not include representation of PPC in the United States Tax Court, the United States Court of Federal Claims, any United States District Court, or any other federal or state court proceeding. If litigation becomes necessary — whether by petition to the Tax Court following issuance of a statutory notice of deficiency (90-Day Letter), by refund suit, or otherwise — a separate engagement letter reflecting the terms of litigation representation will be required.

(b) Tax Return Preparation. This engagement does not include the preparation or filing of PPC's federal or state income tax returns, amended returns (including Forms 1120X), claims for refund, or any international informational returns (including, without limitation, Forms 5471, Forms 8865, Forms 8858, or Forms 8991/8992 relating to GILTI). The preparation and filing of such returns remains the responsibility of PPC and its return preparers.

(c) Irish Tax Proceedings. This engagement does not cover Irish tax proceedings or filings with the Irish Revenue Commissioners, which remain the sole responsibility of T&K and PPC's Irish subsidiaries. However, C&H will coordinate with T&K as needed on matters relating to the U.S.-Ireland Income Tax Treaty, MAP considerations, and dual-jurisdiction defense strategy.

(d) Other Tax Years. This engagement does not cover transfer pricing matters for tax years other than TY 2017, 2018, 2019, and 2020, unless separately agreed in writing by C&H and PPC. If the IRS seeks to expand the scope of the Examination to include additional tax years, C&H will advise PPC and propose appropriate modifications to this engagement.

3. Engagement Team and Staffing

C&H has assembled an engagement team with extensive experience in transfer pricing controversy, IRS examination defense, and international tax matters. The members of the core engagement team are identified below.

3.1 Responsible Partner

Leonard Cross, Partner, Tax Department, will serve as the Responsible Partner for this engagement. Mr. Cross will have overall responsibility for engagement strategy, the client relationship, and representation before IRS Appeals. Mr. Cross has twenty-eight (28) years of experience in transfer pricing controversy matters, including the defense of large-scale IRS examinations involving pharmaceutical, technology, and consumer products companies. He has represented clients before the IRS examination division, IRS Appeals, the IRS Office of Chief Counsel, and in competent authority proceedings under bilateral tax treaties.

Mr. Cross is licensed to practice law in the states of New York and New Jersey and the District of Columbia. His primary office is located at 1735 Market Street, Suite 3100, Philadelphia, PA 19103, and he may be reached at (215) 492-7710 or lcross@calderwoodharkness.com.

3.2 Billing Partner

Sylvia Hartwell, Partner, Tax Department, will serve as the Billing Partner for this engagement. Ms. Hartwell will have responsibility for client management, billing oversight, and co-direction of the international tax controversy practice group's involvement in this matter. Ms. Hartwell has twenty-two (22) years of experience and leads C&H's international tax controversy practice. She has extensive experience with IRS examinations involving cost-sharing arrangements, transfer pricing for intangible property, and cross-border restructurings.

Ms. Hartwell is licensed to practice law in the state of New York and the District of Columbia. Her primary office is located at 600 Lexington Avenue, New York, NY 10022, and she may be reached at (212) 546-8045 or shartwell@calderwoodharkness.com.

3.3 Lead Associate

Garrett Simmons, Associate, Tax Department, will serve as Lead Associate. Mr. Simmons will have primary responsibility for IDR response preparation, coordination of economic analyses with retained experts (including WVG, as described in Section 6 below), and day-to-day management of the examination process. Mr. Simmons has seven (7) years of experience, specializing in transfer pricing economic analysis and IRS controversy, including extensive experience coordinating responses to IDRs in LB&I transfer pricing examinations.

Mr. Simmons is licensed to practice law in the state of New York. His primary office is located in Philadelphia at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.

3.4 Working Associate

Leila Nazari, Associate, Tax Department, will serve as Working Associate. Ms. Nazari will have responsibility for legal research, document production support, coordination with PPC's Irish tax advisors (T&K) on dual-jurisdiction matters, and ancillary legal analyses including penalty exposure, financial reporting, and treaty considerations. Ms. Nazari has four (4) years of experience and focuses on international tax structuring and controversy support, including cross-border intellectual property transactions and treaty analysis.

Ms. Nazari is licensed to practice law in the states of New York and New Jersey. Her primary office is located in Philadelphia at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.

3.5 Additional Personnel

C&H may utilize paralegals, tax analysts, and other professional support personnel as needed to provide efficient and high-quality services in connection with this engagement. The names and billing rates of paralegals and other support personnel who may work on this matter are set forth in Enclosure A.

Any material changes to the core engagement team — including the departure or reassignment of the Responsible Partner, Billing Partner, Lead Associate, or Working Associate — will be communicated to PPC in advance, and C&H will consult with PPC regarding the selection of replacement team members.

C&H reserves the right to add attorneys or other professionals to the engagement team as the matter requires, including specialists in areas such as IRS practice and procedure, penalty defense, financial products, or SEC disclosure. Any such additions will be made in consultation with PPC, and PPC will be informed of the billing rates for any additional team members prior to their commencement of work on the matter.

4. Fee Arrangements

4.1 Hourly Billing Rates (2022)

C&H's services in connection with this engagement will be billed on an hourly basis at the following rates, which are effective as of January 1, 2022:

Paralegal and tax analyst rates vary depending on the seniority and experience of the individual assigned. A complete schedule of 2022 billing rates for all timekeepers who may work on this matter is set forth in Enclosure A.

C&H's standard hourly billing rates are subject to annual adjustment, typically effective as of January 1 of each calendar year. PPC will be notified of any changes to the hourly rates applicable to this engagement at least thirty (30) days in advance of the effective date of such changes.

4.2 Fee Estimate

Based on C&H's preliminary assessment of the scope and complexity of the IRS Examination — including the number of intercompany transactions at issue, the complexity of the CSA and PCT valuation, the likely volume of IDRs, and the potential for the matter to proceed through IRS Appeals — the Firm estimates that total legal fees for C&H's representation through resolution at IRS Appeals will be in the range of $4,500,000 to $7,000,000.

This estimate is provided for budgeting purposes only and does not constitute a fee cap, fixed fee, or guarantee. Actual fees will depend on a number of factors that cannot be predicted with certainty at the outset of the engagement, including but not limited to: the scope and duration of the IRS examination; the number, breadth, and complexity of IDRs issued by the IRS; whether the IRS issues one or more NOPAs; whether the matter proceeds to IRS Appeals and the complexity of the Appeals process; the nature and aggressiveness of the IRS's positions; the extent of expert economic analysis required; and the availability and responsiveness of PPC personnel and third-party advisors.

The estimate set forth above does not include the fees and expenses of third-party experts retained in connection with this engagement (including Whitmore Valuation Group LLC, as described in Section 6), the fees and expenses of PPC's independent auditor (Crestfield & Associates LLP), or the fees and expenses of PPC's Irish tax advisors (Thornbury & Keogh). Such fees will be billed separately by those parties directly to PPC or, in the case of experts retained under a Kovel arrangement, passed through to PPC at cost as described in Section 6 below.

C&H will provide PPC with quarterly budget updates summarizing fees and expenses incurred to date, the projected range of fees and expenses through the conclusion of the matter, and any material changes to the Firm's assessment of the scope or complexity of the engagement. C&H will promptly advise PPC if actual fees are projected to exceed the estimated range set forth above.

4.3 Expenses. PPC will reimburse C&H for reasonable out-of-pocket expenses incurred in connection with this engagement, including but not limited to the following categories:

(a) travel expenses, including airfare (coach or business class for flights exceeding four hours), hotel accommodations, ground transportation, meals, and related incidentals incurred in connection with travel to IRS offices, PPC offices, PBI offices in Dublin, or other locations as required by the engagement;

(b) document reproduction and production costs, including photocopying, scanning, electronic document processing, and the preparation of document productions in response to IDRs;

(c) electronic research charges, including charges for Westmark Data Systems, Tidewater Technologies, and similar legal research databases;

(d) courier and delivery fees, including charges for Severin Partners LLC, Halcyon Partners LLC, and similar services; and

(e) filing fees and other governmental charges.

Any individual expense item exceeding $5,000 will be approved by PPC in advance. C&H will exercise reasonable judgment in incurring expenses and will seek cost-effective alternatives where practicable.

4.4 Billing and Payment Terms

C&H will render monthly invoices to PPC detailing the time entries by attorney and other timekeeper, including the date, description of services performed, hours expended, applicable hourly rate, and total fees, as well as an itemization of expenses incurred during the billing period. All invoices will reference Matter Number 1018-00009.

Invoices are due and payable within thirty (30) days of PPC's receipt thereof. Payments should be made by wire transfer or check to the account or address specified on the invoice.

PPC may direct billing-related inquiries to Sylvia Hartwell at (212) 546-8045 or shartwell@calderwoodharkness.com. C&H's billing department may also be contacted at billing@calderwoodharkness.com.

5. IRS Power of Attorney

In order to enable C&H to communicate directly with the IRS examination team, receive copies of IRS correspondence relating to the Examination, and represent PPC in IRS conferences and proceedings, PPC will execute IRS Form 2848 (Power of Attorney and Declaration of Representative) authorizing the following C&H attorneys to represent PPC before the IRS for tax years 2017, 2018, 2019, and 2020 with respect to income tax matters (Form 1120):

• Leonard Cross, Attorney, CAF No. to be assigned

• Sylvia Hartwell, Attorney, CAF No. to be assigned

• Garrett Simmons, Attorney, CAF No. to be assigned

• Leila Nazari, Attorney, CAF No. to be assigned

A draft Form 2848 is enclosed herewith as Enclosure B for PPC's review and execution. The executed Form 2848 will be filed with the IRS Centralized Authorization File (CAF) unit promptly following execution of this engagement letter. C&H's target filing date is on or before June 8, 2022, in order to ensure that the power of attorney is on file with the IRS prior to the anticipated scheduling of the opening conference with the IRS examination team.

PPC's execution of the Form 2848 does not revoke any previously filed powers of attorney unless PPC so directs. PPC should advise C&H if any prior Forms 2848 have been filed with the IRS for TY 2017–2020 so that C&H can ensure proper coordination.

6. Retention of Economic Experts — Kovel Arrangement

Transfer pricing examinations of this nature invariably require the preparation of detailed economic analyses, including functional analyses, industry and comparable company benchmarking, and valuation studies. In order to ensure that such economic analyses are prepared under the protection of the attorney-client privilege and the work-product doctrine, C&H will retain, at PPC's direction and expense, an independent transfer pricing economic consulting firm under a Kovel arrangement.

Specifically, C&H will retain Whitmore Valuation Group LLC ("WVG"), an independent transfer pricing economic consulting firm, to provide expert economic analyses in support of C&H's legal advice to PPC. The lead economist assigned by WVG to this engagement will be Dr. Helena Vasquez, Managing Director, whose office is located at 200 Ashbury Asset Advisors, Suite 700, Boston, MA 02109. Dr. Vasquez holds a Ph.D. in Economics from the Massachusetts Institute of Technology and has over twenty (20) years of experience in transfer pricing economics, including the valuation of pharmaceutical intellectual property and cost-sharing arrangements.

All of WVG's work product in connection with this engagement will be prepared under the direction and supervision of C&H and is intended to be protected by the attorney-client privilege and the work-product doctrine. C&H will take appropriate steps to ensure that the Kovel arrangement is properly structured and documented to preserve privilege protections, consistent with the principles established in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), and its progeny.

A separate Kovel engagement letter (Reference: 1018-00009-KV) will be executed between C&H and WVG setting forth the terms and conditions of WVG's retention, including the scope of WVG's services, fee arrangements, confidentiality obligations, and privilege protocols. A copy of the executed Kovel engagement letter will be provided to PPC for its records.

WVG's fees are anticipated to be billed at a blended hourly rate of approximately $650 per hour for professional time, plus reasonable out-of-pocket expenses. WVG's fees and expenses will be billed by WVG directly to PPC or, if billed through C&H, passed through at cost without markup.

Anticipated WVG deliverables in connection with this engagement include, but are not limited to, the following:

(a) a comprehensive functional analysis of PPC and PBI, documenting the functions performed, assets used, and risks assumed by each party in connection with the intercompany transactions under examination;

(b) a benchmarking study employing the comparable uncontrolled transaction ("CUT") method and the comparable profits method ("CPM"), as applicable, to evaluate the arm's-length character of PPC's intercompany royalty rates;

(c) a PCT valuation analysis employing the income method (Discounted cash flow / "DCF") to evaluate the arm's-length character of the PCT payment made in connection with the 2012 CSA;

(d) expert reports suitable for submission to the IRS examination team and/or IRS Appeals in support of PPC's transfer pricing positions; and

(e) rebuttal analyses responding to any economic analyses or positions advanced by IRS economists.

7. Coordination with Other Advisors

7.1 Crestfield & Associates LLP

C&H will coordinate closely with Crestfield & Associates LLP ("Crestfield"), PPC's independent auditor and the preparer of PPC's contemporaneous transfer pricing documentation for TY 2017–2020. The primary contacts at Crestfield for purposes of this engagement are Martin Ogilvy, Engagement Partner, and Susan Lam, Transfer Pricing Partner.

Crestfield originally prepared PPC's contemporaneous transfer pricing documentation for TY 2017, 2018, 2019, and 2020, in accordance with the requirements of IRC § 6662(e) and Treasury Regulation § 1.6662-6(d), including the principal documents and background documents described therein. C&H will obtain from Crestfield copies of PPC's federal income tax returns (Forms 1120), transfer pricing documentation reports, supporting workpapers, comparable company search analyses, financial data, and related materials for each of the Tax Years under examination.

It is understood that Crestfield will not appear as counsel of record in the IRS Examination. C&H will serve as PPC's sole counsel of record before the IRS in connection with this matter. However, C&H may request that Crestfield personnel participate in certain meetings or provide factual information relating to the preparation of the tax returns or transfer pricing documentation, subject to C&H's direction and appropriate privilege considerations.

7.2 Thornbury & Keogh

C&H will coordinate with Thornbury & Keogh ("T&K"), PPC's Irish tax advisors for PBI and PMI, on dual-jurisdiction aspects of the transfer pricing defense. The primary contact at T&K for purposes of this engagement is Ciarán Thornbury, Lead Partner.

Coordination with T&K will encompass the following areas:

(a) Irish Revenue filing coordination, including any notifications or disclosures required by PBI in connection with the IRS Examination;

(b) PBI substance documentation, including the compilation and organization of evidence demonstrating PBI's operational substance in Ireland, the functions performed by PBI personnel, the assets maintained in Ireland, and the decision-making authority exercised by PBI's management and board;

(c) Knowledge Development box ("KDB") claims, to the extent that PBI has made or intends to make claims under the Irish KDB regime (Finance Act 2015, Part 29A) and such claims are relevant to the U.S. transfer pricing defense; and

(d) Potential MAP and competent authority considerations under Article 25 of the U.S.-Ireland Income Tax Treaty, including the coordination of any competent authority request filed with the IRS with a corresponding application to the Irish Revenue Commissioners, to the extent that a dual filing is advisable to mitigate the risk of double taxation arising from proposed IRS § 482 adjustments.

8. Privilege and Confidentiality Protocols

The preservation of the attorney-client privilege and the work-product doctrine is of paramount importance in connection with this engagement. The following protocols are designed to ensure the protection of privileged communications and work product.

8.1 Attorney-Client Privilege

All communications between C&H and PPC in connection with this engagement are intended to be, and should be treated as, privileged and confidential attorney-client communications within the meaning of applicable law. This includes oral communications, written correspondence, emails, memoranda, and any other form of communication between C&H attorneys and PPC personnel relating to the subject matter of the Examination.

PPC should take care to maintain the privileged nature of such communications by limiting their distribution within the Company to individuals who have a need to know for purposes of the Examination, and by clearly marking written communications as "PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION" or words of similar import. PPC should consult with C&H before disclosing any privileged materials to third parties, including PPC's board of directors, auditors, or other advisors, in order to assess whether such disclosure may result in a waiver of privilege.

8.2 Work-Product Doctrine

Analyses, memoranda, legal opinions, strategy documents, and other documents prepared by C&H in anticipation of litigation or in providing legal advice to PPC in connection with the Examination are protected by the work-product doctrine under Federal Rule of Civil Procedure 26(b)(3) and its state-law equivalents. This protection extends to both "fact" work product and "opinion" work product, with the latter receiving near-absolute protection from disclosure.

The Kovel arrangement with WVG, as described in Section 6, is specifically designed to extend the protections of the attorney-client privilege and the work-product doctrine to WVG's work product prepared at C&H's direction and for the purpose of assisting C&H in rendering legal advice to PPC. C&H will take appropriate steps to ensure that WVG's work product is clearly identified as having been prepared under C&H's direction and for use in connection with C&H's legal representation of PPC.

8.3 Document Preservation

C&H will issue a document preservation notice (litigation hold) to PPC and its relevant subsidiaries — including PBI, PHL, and PMI — promptly following execution of this Letter. The document preservation notice will direct the preservation of all documents, data, electronically stored information, and tangible things relevant to the IRS Examination of TY 2017–2020, including but not limited to:

(a) intercompany agreements, amendments, and related correspondence;

(b) board and management meeting minutes, presentations, and resolutions relating to transfer pricing, the CSA, the PPC-PBI license agreement, and intercompany transactions;

(d) transfer pricing documentation, studies, and analyses;

(e) communications with the IRS, Irish Revenue, or other taxing authorities;

(f) emails, instant messages, and other electronic communications relating to the foregoing; and

(g) any other documents or data that may be relevant to the IRS's examination of PPC's transfer pricing methodology.

PPC should ensure that all automatic deletion programs (including email retention policies and document destruction schedules) are suspended with respect to the categories of documents identified in the preservation notice for the duration of this engagement.

8.4 Privilege Logs

C&H will prepare and maintain privilege logs as necessary in connection with document productions to the IRS in response to IDRs. Privilege logs will identify documents withheld from production on the grounds of attorney-client privilege, the work-product doctrine, or the tax practitioner privilege under IRC § 7525, including for each withheld document: the date, author(s), recipient(s), a general description of the document's subject matter (without disclosing privileged content), and the basis for the privilege assertion.

C&H will consult with PPC regarding any challenges by the IRS to privilege claims and will take appropriate steps to protect PPC's privilege rights, including, if necessary, seeking judicial review of any IRS attempts to compel production of privileged materials.

9. Client Responsibilities

The success of this engagement will depend in significant part on the timely and full cooperation of PPC and its personnel. PPC agrees to the following responsibilities:

(a) Primary and Secondary Contacts. PPC will designate Marcus Whitfield, Vice President of Global Tax, as the primary client contact for day-to-day matters arising in connection with the Examination, including coordination of IDR responses, scheduling, and factual inquiries. PPC will designate Deborah Staines, General Counsel, as the secondary contact for legal and governance matters, including privilege issues, SEC disclosure considerations, and matters requiring escalation to PPC's executive leadership or board of directors.

(b) Access to Documents, Data, and Personnel. PPC will provide C&H with timely access to all documents, data, personnel, and information necessary to conduct the defense, including access to PBI's Managing Director (Aidan Naughton) and PBI personnel located in Dublin, Ireland. PPC will use its best efforts to respond to C&H's requests for information within the timeframes reasonably established by C&H in light of IRS deadlines.

(c) Prompt Notification of IRS Communications. PPC will notify C&H promptly — and in no event later than two (2) business days — of any communications received directly from the IRS or any other taxing authority relating to the Examination or to PPC's transfer pricing for TY 2017–2020, including any IDRs, summonses, notices, or other correspondence. PPC will also promptly notify C&H of any material developments affecting the Examination, including changes in PPC's business, operations, or corporate structure that may be relevant to the transfer pricing issues under review.

(d) Internal Approvals. PPC will obtain all necessary internal approvals, including from Chief Executive Officer Catherine Falk and Chief Financial Officer Rajesh Iyer as appropriate, for major strategic decisions in connection with the Examination, including decisions regarding the assertion or concession of positions, the initiation of a competent authority request, and any settlement or closing agreement with the IRS.

10. Conflicts of Interest

C&H has conducted a comprehensive conflicts check in accordance with the Firm's standard procedures and the applicable Rules of Professional Conduct. Based on that review, C&H has determined that it has no conflicts of interest that would preclude its representation of PPC in connection with this engagement.

The conflicts check encompassed PPC and its relevant affiliates, including PBI, PHL, and PMI; PPC's other advisors, including Crestfield & Associates LLP and Thornbury & Keogh; and relevant IRS personnel identified in the Letter 2205-A, including Supervisory Revenue Agent Gerald Meskill and Lead Revenue Agent Patricia Dunleavy.

C&H is a large law firm with offices throughout the United States and internationally. It is possible that C&H currently represents, has represented, or in the future will represent other clients in matters unrelated to this engagement. PPC acknowledges that C&H's representation of PPC in this engagement does not preclude C&H from representing other clients in matters unrelated to PPC's affairs, provided that such representation does not create a conflict of interest under the applicable Rules of Professional Conduct.

If a conflict of interest arises during the course of this engagement — whether due to C&H's representation of other clients, the acquisition of new clients, or other circumstances — C&H will promptly notify PPC and take appropriate steps in accordance with the applicable ethical rules, including, if necessary, seeking PPC's informed consent to continued representation, implementing appropriate ethical screens, or withdrawing from the engagement.

11. Termination

Either party may terminate this engagement at any time upon written notice to the other party. C&H may also withdraw from the engagement in accordance with the applicable Rules of Professional Conduct, including in circumstances where continued representation would result in a violation of ethical obligations or where PPC fails to fulfill its obligations under this Letter, including the timely payment of invoices.

Upon termination of this engagement by either party:

(a) PPC will be responsible for the payment of all fees and expenses incurred by C&H through the date of termination, including fees for time expended and expenses incurred but not yet billed;

(b) C&H will take reasonable steps to protect PPC's interests during any transition period, including the orderly transfer of the engagement file and work product to PPC or to successor counsel designated by PPC; and

(c) C&H will cooperate in the transition, including making its attorneys and personnel reasonably available to successor counsel for a reasonable period following termination to facilitate an orderly transfer of knowledge and responsibilities.

C&H's obligations regarding confidentiality, attorney-client privilege, and the protection of PPC's confidential information and privileged materials shall survive the termination of this engagement and shall remain in effect indefinitely.

12. File Retention

At the conclusion of this engagement, C&H will retain the engagement file — including correspondence, memoranda, work product, and related materials — for a period consistent with the Firm's document retention policy, which currently provides for retention of closed matter files for a period of seven (7) years from the date of matter closure.

PPC may request copies of the engagement file, or any portion thereof, at any time during this retention period. Upon expiration of the retention period, C&H may destroy the file in accordance with the Firm's standard procedures without further notice to PPC, unless PPC has requested return of the file or directed otherwise in writing.

PPC's original documents provided to C&H during the course of the engagement will be returned to PPC upon request at any time, whether before or after the conclusion of the engagement.

13. Governing Law

This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflicts of law. Any dispute arising out of or relating to this engagement letter or the services provided hereunder shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the County of New York or the United States District Court for the Southern District of New York.

14. Acceptance and Execution

We are honored that PPC has selected Calderwood & Harkness LLP to represent the Company in this important matter, and we look forward to working with you, Ms. Staines, and the PPC team throughout the course of this engagement.

If the foregoing terms and conditions are acceptable to PPC, please indicate your agreement by signing and returning a copy of this Letter to the undersigned. This Letter may be executed in counterparts, each of which shall be deemed an original, and may be delivered by electronic transmission (including PDF). Upon execution by both parties, this Letter shall constitute a binding agreement between C&H and PPC.

Please do not hesitate to contact Leonard Cross at (215) 492-7710 or Sylvia Hartwell at (212) 546-8045 if you have any questions regarding this Letter or the engagement generally.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Leonard Cross Partner, Tax Department Responsible Partner Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 492-7710

Email: lcross@calderwoodharkness.com

By: ________

Sylvia Hartwell Partner, Tax Department Billing Partner Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 546-8045

Email: shartwell@calderwoodharkness.com

Date: ________

ACKNOWLEDGMENT AND AGREEMENT

The undersigned, on behalf of Penterra Pharmaceuticals Corp., hereby acknowledge and agree to the terms and conditions set forth in the foregoing Engagement Letter dated June 2, 2022.

PENTERRA PHARMACEUTICALS CORP.

By: ________

Name: Marcus Whitfield

Title: Vice President, Global Tax

Date: June 2, 2022

By: ________

Name: Deborah Staines

Title: General Counsel

Date: June 2, 2022

ENCLOSURES

The following enclosures are attached to and incorporated by reference into this Engagement Letter:

Enclosure A: 2022 Billing Rate Schedule (fee-schedule-2022.xlsx)

Enclosure B: Draft IRS Form 2848 — Power of Attorney and Declaration of Representative

Enclosure C: Matter Staffing Plan (matter-staffing-plan.docx)

Timekeeper	Title	2022 Hourly Rate
Leonard Cross	Partner	$1,475
Sylvia Hartwell	Partner	$1,350
Garrett Simmons	Associate	$885
Leila Nazari	Associate	$695
Paralegals / Tax Analysts	—	$350 – $425

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 546-8000 Facsimile: (212) 546-8001
Tax Practice Group 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 492-7700 Facsimile: (215) 492-7701
www.calderwoodharkness.com
June 2, 2022
Mr. Marcus Whitfield Vice President, Global Tax Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550
Ms. Deborah Staines General Counsel Penterra Pharmaceuticals Corp. 2200 Independence Boulevard Princeton Junction, NJ 08550
Re: Engagement of Calderwood & Harkness LLP — IRS Transfer Pricing Examination Defense Matter Number: 1018-00009 Client: Penterra Pharmaceuticals Corp. (EIN: 22-3741856) Tax Years Under Examination: 2017, 2018, 2019, 2020
Dear Mr. Whitfield and Ms. Staines:
1. Introduction and Purpose
Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm its engagement by Penterra Pharmaceuticals Corp. ("PPC" or the "Company"), a Delaware corporation headquartered in Princeton Junction, New Jersey, and publicly traded on the Nasdaq Stock Market (ticker symbol: PPCA), as outside tax counsel in connection with the matters described herein.
This engagement letter (the "Letter") sets forth the terms and conditions upon which C&H will represent PPC in connection with the Internal Revenue Service ("IRS") Large Business & International Division ("LB&I") examination of PPC's transfer pricing methodology for federal income tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020 (collectively, the "Tax Years" or "TY 2017–2020"). As you are aware, PPC received an initial contact letter from the IRS (Letter 2205-A) dated May 16, 2022, bearing IRS Exam Team identification number LB&I-NE-TP-2022-00641 (the "Examination"). The Examination is supervised by Supervisory Revenue Agent Gerald Meskill and led by Lead Revenue Agent Patricia Dunleavy.
We understand that the IRS has identified PPC's intercompany transfer pricing arrangements as a focus area for the Examination, and that the LB&I team includes at least one IRS economist. Given the magnitude of the intercompany transactions at issue, the complexity of the applicable transfer pricing regulations under Internal Revenue Code ("IRC") Section 482, and the potential for significant proposed adjustments, PPC has determined that engagement of experienced outside tax controversy counsel is warranted.
This Letter supersedes any prior discussions, proposals, or correspondence between C&H and PPC regarding this engagement and constitutes the entire agreement between the Firm and the Company with respect to the representation described herein. Any modifications to the terms of this Letter must be agreed to in writing by both parties.
2. Scope of Representation
2.1 General Scope
C&H will serve as outside tax counsel to PPC in defending against the IRS examination challenging the transfer pricing methodology employed in PPC's intercompany arrangements with its Irish subsidiary, Penterra Biopharma International Designated Activity Company ("PBI"), an Irish-incorporated entity. The defense will also encompass the intercompany transactions between PPC and PBI's wholly owned subsidiaries, Penterra Holdings Limited ("PHL") and Penterra Manufacturing Ireland Limited ("PMI"), to the extent such transactions are encompassed within the IRS's examination scope.
The Examination concerns, in particular, the qualified cost-sharing arrangement ("CSA") entered into between PPC and PBI effective July 1, 2012, as amended, including the platform contribution transaction ("PCT") valuations relating to pre-existing intangible property contributed by PPC to the CSA at its inception, the ongoing cost-sharing payments made between PPC and PBI, and the reasonably anticipated benefits ("RAB") shares used to allocate intangible development costs. Additionally, the Examination concerns the intercompany royalty rates for legacy intellectual property licensed by PPC to PBI under the PPC-PBI License Agreement dated January 15, 2010, as amended, which covers certain pharmaceutical compounds and related know-how developed by PPC prior to the formation of the CSA.
The IRS is examining PPC's federal income tax returns (Forms 1120) for TY 2017, 2018, 2019, and 2020, and the Examination may extend to any schedules, attachments, or informational returns associated therewith, including but not limited to Schedule M-3, Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations), and Form 8865 (Return of U.S. Persons with Respect to Certain Foreign Partnerships), to the extent relevant to the transfer pricing issues under review.
2.2 Specific Services
C&H will provide the following services in connection with the Examination, subject to the limitations set forth in Section 2.3 below:
(a) IDR Responses. Preparation of and strategy for responses to Information Document Requests ("IDRs") issued by the IRS examination team, including analysis of the legal bases for the IRS's requests, identification of responsive documents and data, coordination with PPC's internal teams to gather information, and drafting of written narrative responses and cover letters as appropriate. C&H will manage the IDR process in accordance with the IRS's current IDR enforcement procedures set forth in LB&I Directive LB&I-04-0118-005 and subsequent guidance.
(b) Functional and Economic Analyses. Preparation and coordination of functional and economic analyses supporting PPC's transfer pricing positions, including the development of legal and factual arguments to defend PPC's chosen methods under the best-method analysis required by Treasury Regulation § 1.482-1(c).
(c) Coordination with Crestfield & Associates LLP. Coordination with PPC's independent auditor and transfer pricing documentation preparer, Crestfield & Associates LLP ("Crestfield"), regarding federal income tax return data, contemporaneous transfer pricing documentation prepared under IRC § 6662(e) and Treasury Regulation § 1.6662-6, and related workpapers, analyses, and databases used in the preparation of PPC's transfer pricing studies for TY 2017–2020.
(d) Irish Tax Advisor Coordination. Coordination with PPC's Irish tax advisors, Thornbury & Keogh ("T&K"), regarding dual-jurisdiction aspects of the defense, including Irish Revenue considerations, PBI substance documentation, and potential competent authority or mutual agreement procedure implications under the Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the "U.S.-Ireland Income Tax Treaty").
(e) Kovel Arrangement — Expert Retention. Retention and direction of transfer pricing economic consultants under the attorney-client privilege, pursuant to an arrangement consistent with the principles established in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961) (a "Kovel arrangement"), as more fully described in Section 6 below.
(f) IRS Conferences. Attendance at and representation during IRS conferences, including the opening conference, any mid-examination conferences, progress meetings, and meetings with IRS economists, IRS valuation specialists, or attorneys from the IRS Office of Chief Counsel.
(g) NOPA and 30-Day Letter Review. Review and analysis of any Notice of Proposed Adjustment ("NOPA") issued by the IRS examination team, and review and analysis of any 30-Day Letter (Letter 950 or equivalent) issued upon the conclusion of the examination.
(h) IRS Appeals Protest. Preparation and filing of a formal Protest to the IRS Independent Office of Appeals (the "Appeals Division"), if necessary, including the preparation of a detailed written protest addressing the factual, legal, and economic bases for PPC's positions.
(i) Appeals Representation. Representation before the IRS Appeals Division, including preparation for and attendance at Appeals conferences, submission of supplemental legal and economic analyses, and negotiation of any resolution with the Appeals Officer and any Appeals economists assigned to the case.
(j) Settlement Negotiation. Negotiation of any settlement or closing agreement, including preparation and review of IRS Form 906 (Closing Agreement on Final Determination Covering Specific Matters), and analysis of the terms and conditions of any proposed resolution.
(k) Ancillary Analyses. Analysis of ancillary issues arising in connection with the Examination, including but not limited to:
(i) IRC § 6662(e) transfer pricing penalty exposure under the substantial valuation misstatement and gross valuation misstatement provisions, and the development of a reasonable-cause defense under IRC § 6664(c) and Treasury Regulation § 1.6664-4;
(ii) Financial reporting considerations under ASC 740-10-25 (formerly FIN 48), including analysis of whether PPC's transfer pricing positions satisfy the "more-likely-than-not" recognition threshold and the assessment of measurement-step reserves;
(iii) Securities and Exchange Commission ("SEC") disclosure considerations arising from the Examination, including potential disclosure obligations under SEC Regulation S-K, Item 103 (Legal Proceedings) and Item 303 (Management's Discussion and Analysis);
(iv) Credit facility covenant implications, including analysis of any financial covenant impacts that may arise from proposed IRS adjustments to taxable income;
(v) Potential competent authority and mutual agreement procedure ("MAP") considerations under Article 25 of the U.S.-Ireland Income Tax Treaty, including the advisability and timing of a competent authority request to the IRS and coordination with T&K regarding a corresponding application to the Irish Revenue Commissioners; and
(vi) Analysis of the interaction between any proposed IRC § 482 adjustments and the Global Intangible Low-Taxed Income ("GILTI") provisions of IRC § 951A and the Base Erosion and Anti-Abuse Tax ("BEAT") provisions of IRC § 59A, including the potential for cascading effects on PPC's overall tax liability.
(l) Privilege Protocols. Preparation of document preservation notices and privilege protocols, as more fully described in Section 8 below.
2.3 Limitations on Scope
The following matters are expressly excluded from the scope of this engagement:
(a) Litigation. This engagement does not include representation of PPC in the United States Tax Court, the United States Court of Federal Claims, any United States District Court, or any other federal or state court proceeding. If litigation becomes necessary — whether by petition to the Tax Court following issuance of a statutory notice of deficiency (90-Day Letter), by refund suit, or otherwise — a separate engagement letter reflecting the terms of litigation representation will be required.
(b) Tax Return Preparation. This engagement does not include the preparation or filing of PPC's federal or state income tax returns, amended returns (including Forms 1120X), claims for refund, or any international informational returns (including, without limitation, Forms 5471, Forms 8865, Forms 8858, or Forms 8991/8992 relating to GILTI). The preparation and filing of such returns remains the responsibility of PPC and its return preparers.
(c) Irish Tax Proceedings. This engagement does not cover Irish tax proceedings or filings with the Irish Revenue Commissioners, which remain the sole responsibility of T&K and PPC's Irish subsidiaries. However, C&H will coordinate with T&K as needed on matters relating to the U.S.-Ireland Income Tax Treaty, MAP considerations, and dual-jurisdiction defense strategy.
(d) Other Tax Years. This engagement does not cover transfer pricing matters for tax years other than TY 2017, 2018, 2019, and 2020, unless separately agreed in writing by C&H and PPC. If the IRS seeks to expand the scope of the Examination to include additional tax years, C&H will advise PPC and propose appropriate modifications to this engagement.
3. Engagement Team and Staffing
C&H has assembled an engagement team with extensive experience in transfer pricing controversy, IRS examination defense, and international tax matters. The members of the core engagement team are identified below.
3.1 Responsible Partner
Leonard Cross, Partner, Tax Department, will serve as the Responsible Partner for this engagement. Mr. Cross will have overall responsibility for engagement strategy, the client relationship, and representation before IRS Appeals. Mr. Cross has twenty-eight (28) years of experience in transfer pricing controversy matters, including the defense of large-scale IRS examinations involving pharmaceutical, technology, and consumer products companies. He has represented clients before the IRS examination division, IRS Appeals, the IRS Office of Chief Counsel, and in competent authority proceedings under bilateral tax treaties.
Mr. Cross is licensed to practice law in the states of New York and New Jersey and the District of Columbia. His primary office is located at 1735 Market Street, Suite 3100, Philadelphia, PA 19103, and he may be reached at (215) 492-7710 or lcross@calderwoodharkness.com.
3.2 Billing Partner
Sylvia Hartwell, Partner, Tax Department, will serve as the Billing Partner for this engagement. Ms. Hartwell will have responsibility for client management, billing oversight, and co-direction of the international tax controversy practice group's involvement in this matter. Ms. Hartwell has twenty-two (22) years of experience and leads C&H's international tax controversy practice. She has extensive experience with IRS examinations involving cost-sharing arrangements, transfer pricing for intangible property, and cross-border restructurings.
Ms. Hartwell is licensed to practice law in the state of New York and the District of Columbia. Her primary office is located at 600 Lexington Avenue, New York, NY 10022, and she may be reached at (212) 546-8045 or shartwell@calderwoodharkness.com.
3.3 Lead Associate
Garrett Simmons, Associate, Tax Department, will serve as Lead Associate. Mr. Simmons will have primary responsibility for IDR response preparation, coordination of economic analyses with retained experts (including WVG, as described in Section 6 below), and day-to-day management of the examination process. Mr. Simmons has seven (7) years of experience, specializing in transfer pricing economic analysis and IRS controversy, including extensive experience coordinating responses to IDRs in LB&I transfer pricing examinations.
Mr. Simmons is licensed to practice law in the state of New York. His primary office is located in Philadelphia at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.
3.4 Working Associate
Leila Nazari, Associate, Tax Department, will serve as Working Associate. Ms. Nazari will have responsibility for legal research, document production support, coordination with PPC's Irish tax advisors (T&K) on dual-jurisdiction matters, and ancillary legal analyses including penalty exposure, financial reporting, and treaty considerations. Ms. Nazari has four (4) years of experience and focuses on international tax structuring and controversy support, including cross-border intellectual property transactions and treaty analysis.
Ms. Nazari is licensed to practice law in the states of New York and New Jersey. Her primary office is located in Philadelphia at 1735 Market Street, Suite 3100, Philadelphia, PA 19103.
3.5 Additional Personnel
C&H may utilize paralegals, tax analysts, and other professional support personnel as needed to provide efficient and high-quality services in connection with this engagement. The names and billing rates of paralegals and other support personnel who may work on this matter are set forth in Enclosure A.
Any material changes to the core engagement team — including the departure or reassignment of the Responsible Partner, Billing Partner, Lead Associate, or Working Associate — will be communicated to PPC in advance, and C&H will consult with PPC regarding the selection of replacement team members.
C&H reserves the right to add attorneys or other professionals to the engagement team as the matter requires, including specialists in areas such as IRS practice and procedure, penalty defense, financial products, or SEC disclosure. Any such additions will be made in consultation with PPC, and PPC will be informed of the billing rates for any additional team members prior to their commencement of work on the matter.
4. Fee Arrangements
4.1 Hourly Billing Rates (2022)
C&H's services in connection with this engagement will be billed on an hourly basis at the following rates, which are effective as of January 1, 2022:
Paralegal and tax analyst rates vary depending on the seniority and experience of the individual assigned. A complete schedule of 2022 billing rates for all timekeepers who may work on this matter is set forth in Enclosure A.
C&H's standard hourly billing rates are subject to annual adjustment, typically effective as of January 1 of each calendar year. PPC will be notified of any changes to the hourly rates applicable to this engagement at least thirty (30) days in advance of the effective date of such changes.
4.2 Fee Estimate
Based on C&H's preliminary assessment of the scope and complexity of the IRS Examination — including the number of intercompany transactions at issue, the complexity of the CSA and PCT valuation, the likely volume of IDRs, and the potential for the matter to proceed through IRS Appeals — the Firm estimates that total legal fees for C&H's representation through resolution at IRS Appeals will be in the range of $4,500,000 to $7,000,000.
This estimate is provided for budgeting purposes only and does not constitute a fee cap, fixed fee, or guarantee. Actual fees will depend on a number of factors that cannot be predicted with certainty at the outset of the engagement, including but not limited to: the scope and duration of the IRS examination; the number, breadth, and complexity of IDRs issued by the IRS; whether the IRS issues one or more NOPAs; whether the matter proceeds to IRS Appeals and the complexity of the Appeals process; the nature and aggressiveness of the IRS's positions; the extent of expert economic analysis required; and the availability and responsiveness of PPC personnel and third-party advisors.
The estimate set forth above does not include the fees and expenses of third-party experts retained in connection with this engagement (including Whitmore Valuation Group LLC, as described in Section 6), the fees and expenses of PPC's independent auditor (Crestfield & Associates LLP), or the fees and expenses of PPC's Irish tax advisors (Thornbury & Keogh). Such fees will be billed separately by those parties directly to PPC or, in the case of experts retained under a Kovel arrangement, passed through to PPC at cost as described in Section 6 below.
C&H will provide PPC with quarterly budget updates summarizing fees and expenses incurred to date, the projected range of fees and expenses through the conclusion of the matter, and any material changes to the Firm's assessment of the scope or complexity of the engagement. C&H will promptly advise PPC if actual fees are projected to exceed the estimated range set forth above.
4.3 Expenses.  PPC will reimburse C&H for reasonable out-of-pocket expenses incurred in connection with this engagement, including but not limited to the following categories:
(a) travel expenses, including airfare (coach or business class for flights exceeding four hours), hotel accommodations, ground transportation, meals, and related incidentals incurred in connection with travel to IRS offices, PPC offices, PBI offices in Dublin, or other locations as required by the engagement;
(b) document reproduction and production costs, including photocopying, scanning, electronic document processing, and the preparation of document productions in response to IDRs;
(c) electronic research charges, including charges for Westmark Data Systems, Tidewater Technologies, and similar legal research databases;
(d) courier and delivery fees, including charges for Severin Partners LLC, Halcyon Partners LLC, and similar services; and
(e) filing fees and other governmental charges.
Any individual expense item exceeding $5,000 will be approved by PPC in advance. C&H will exercise reasonable judgment in incurring expenses and will seek cost-effective alternatives where practicable.
4.4 Billing and Payment Terms
C&H will render monthly invoices to PPC detailing the time entries by attorney and other timekeeper, including the date, description of services performed, hours expended, applicable hourly rate, and total fees, as well as an itemization of expenses incurred during the billing period. All invoices will reference Matter Number 1018-00009.
Invoices are due and payable within thirty (30) days of PPC's receipt thereof. Payments should be made by wire transfer or check to the account or address specified on the invoice.
PPC may direct billing-related inquiries to Sylvia Hartwell at (212) 546-8045 or shartwell@calderwoodharkness.com. C&H's billing department may also be contacted at billing@calderwoodharkness.com.
5. IRS Power of Attorney
In order to enable C&H to communicate directly with the IRS examination team, receive copies of IRS correspondence relating to the Examination, and represent PPC in IRS conferences and proceedings, PPC will execute IRS Form 2848 (Power of Attorney and Declaration of Representative) authorizing the following C&H attorneys to represent PPC before the IRS for tax years 2017, 2018, 2019, and 2020 with respect to income tax matters (Form 1120):
•  Leonard Cross, Attorney, CAF No. to be assigned
•  Sylvia Hartwell, Attorney, CAF No. to be assigned
•  Garrett Simmons, Attorney, CAF No. to be assigned
•  Leila Nazari, Attorney, CAF No. to be assigned
A draft Form 2848 is enclosed herewith as Enclosure B for PPC's review and execution. The executed Form 2848 will be filed with the IRS Centralized Authorization File (CAF) unit promptly following execution of this engagement letter. C&H's target filing date is on or before June 8, 2022, in order to ensure that the power of attorney is on file with the IRS prior to the anticipated scheduling of the opening conference with the IRS examination team.
PPC's execution of the Form 2848 does not revoke any previously filed powers of attorney unless PPC so directs. PPC should advise C&H if any prior Forms 2848 have been filed with the IRS for TY 2017–2020 so that C&H can ensure proper coordination.
6. Retention of Economic Experts — Kovel Arrangement
Transfer pricing examinations of this nature invariably require the preparation of detailed economic analyses, including functional analyses, industry and comparable company benchmarking, and valuation studies. In order to ensure that such economic analyses are prepared under the protection of the attorney-client privilege and the work-product doctrine, C&H will retain, at PPC's direction and expense, an independent transfer pricing economic consulting firm under a Kovel arrangement.
Specifically, C&H will retain Whitmore Valuation Group LLC ("WVG"), an independent transfer pricing economic consulting firm, to provide expert economic analyses in support of C&H's legal advice to PPC. The lead economist assigned by WVG to this engagement will be Dr. Helena Vasquez, Managing Director, whose office is located at 200 Ashbury Asset Advisors, Suite 700, Boston, MA 02109. Dr. Vasquez holds a Ph.D. in Economics from the Massachusetts Institute of Technology and has over twenty (20) years of experience in transfer pricing economics, including the valuation of pharmaceutical intellectual property and cost-sharing arrangements.
All of WVG's work product in connection with this engagement will be prepared under the direction and supervision of C&H and is intended to be protected by the attorney-client privilege and the work-product doctrine. C&H will take appropriate steps to ensure that the Kovel arrangement is properly structured and documented to preserve privilege protections, consistent with the principles established in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), and its progeny.
A separate Kovel engagement letter (Reference: 1018-00009-KV) will be executed between C&H and WVG setting forth the terms and conditions of WVG's retention, including the scope of WVG's services, fee arrangements, confidentiality obligations, and privilege protocols. A copy of the executed Kovel engagement letter will be provided to PPC for its records.
WVG's fees are anticipated to be billed at a blended hourly rate of approximately $650 per hour for professional time, plus reasonable out-of-pocket expenses. WVG's fees and expenses will be billed by WVG directly to PPC or, if billed through C&H, passed through at cost without markup.
Anticipated WVG deliverables in connection with this engagement include, but are not limited to, the following:
(a) a comprehensive functional analysis of PPC and PBI, documenting the functions performed, assets used, and risks assumed by each party in connection with the intercompany transactions under examination;
(b) a benchmarking study employing the comparable uncontrolled transaction ("CUT") method and the comparable profits method ("CPM"), as applicable, to evaluate the arm's-length character of PPC's intercompany royalty rates;
(c) a PCT valuation analysis employing the income method (Discounted cash flow / "DCF") to evaluate the arm's-length character of the PCT payment made in connection with the 2012 CSA;
(d) expert reports suitable for submission to the IRS examination team and/or IRS Appeals in support of PPC's transfer pricing positions; and
(e) rebuttal analyses responding to any economic analyses or positions advanced by IRS economists.
7. Coordination with Other Advisors
7.1 Crestfield & Associates LLP
C&H will coordinate closely with Crestfield & Associates LLP ("Crestfield"), PPC's independent auditor and the preparer of PPC's contemporaneous transfer pricing documentation for TY 2017–2020. The primary contacts at Crestfield for purposes of this engagement are Martin Ogilvy, Engagement Partner, and Susan Lam, Transfer Pricing Partner.
Crestfield originally prepared PPC's contemporaneous transfer pricing documentation for TY 2017, 2018, 2019, and 2020, in accordance with the requirements of IRC § 6662(e) and Treasury Regulation § 1.6662-6(d), including the principal documents and background documents described therein. C&H will obtain from Crestfield copies of PPC's federal income tax returns (Forms 1120), transfer pricing documentation reports, supporting workpapers, comparable company search analyses, financial data, and related materials for each of the Tax Years under examination.
It is understood that Crestfield will not appear as counsel of record in the IRS Examination. C&H will serve as PPC's sole counsel of record before the IRS in connection with this matter. However, C&H may request that Crestfield personnel participate in certain meetings or provide factual information relating to the preparation of the tax returns or transfer pricing documentation, subject to C&H's direction and appropriate privilege considerations.
7.2 Thornbury & Keogh
C&H will coordinate with Thornbury & Keogh ("T&K"), PPC's Irish tax advisors for PBI and PMI, on dual-jurisdiction aspects of the transfer pricing defense. The primary contact at T&K for purposes of this engagement is Ciarán Thornbury, Lead Partner.
Coordination with T&K will encompass the following areas:
(a) Irish Revenue filing coordination, including any notifications or disclosures required by PBI in connection with the IRS Examination;
(b) PBI substance documentation, including the compilation and organization of evidence demonstrating PBI's operational substance in Ireland, the functions performed by PBI personnel, the assets maintained in Ireland, and the decision-making authority exercised by PBI's management and board;
(c) Knowledge Development box ("KDB") claims, to the extent that PBI has made or intends to make claims under the Irish KDB regime (Finance Act 2015, Part 29A) and such claims are relevant to the U.S. transfer pricing defense; and
(d) Potential MAP and competent authority considerations under Article 25 of the U.S.-Ireland Income Tax Treaty, including the coordination of any competent authority request filed with the IRS with a corresponding application to the Irish Revenue Commissioners, to the extent that a dual filing is advisable to mitigate the risk of double taxation arising from proposed IRS § 482 adjustments.
8. Privilege and Confidentiality Protocols
The preservation of the attorney-client privilege and the work-product doctrine is of paramount importance in connection with this engagement. The following protocols are designed to ensure the protection of privileged communications and work product.
8.1 Attorney-Client Privilege
All communications between C&H and PPC in connection with this engagement are intended to be, and should be treated as, privileged and confidential attorney-client communications within the meaning of applicable law. This includes oral communications, written correspondence, emails, memoranda, and any other form of communication between C&H attorneys and PPC personnel relating to the subject matter of the Examination.
PPC should take care to maintain the privileged nature of such communications by limiting their distribution within the Company to individuals who have a need to know for purposes of the Examination, and by clearly marking written communications as "PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION" or words of similar import. PPC should consult with C&H before disclosing any privileged materials to third parties, including PPC's board of directors, auditors, or other advisors, in order to assess whether such disclosure may result in a waiver of privilege.
8.2 Work-Product Doctrine
Analyses, memoranda, legal opinions, strategy documents, and other documents prepared by C&H in anticipation of litigation or in providing legal advice to PPC in connection with the Examination are protected by the work-product doctrine under Federal Rule of Civil Procedure 26(b)(3) and its state-law equivalents. This protection extends to both "fact" work product and "opinion" work product, with the latter receiving near-absolute protection from disclosure.
The Kovel arrangement with WVG, as described in Section 6, is specifically designed to extend the protections of the attorney-client privilege and the work-product doctrine to WVG's work product prepared at C&H's direction and for the purpose of assisting C&H in rendering legal advice to PPC. C&H will take appropriate steps to ensure that WVG's work product is clearly identified as having been prepared under C&H's direction and for use in connection with C&H's legal representation of PPC.
8.3 Document Preservation
C&H will issue a document preservation notice (litigation hold) to PPC and its relevant subsidiaries — including PBI, PHL, and PMI — promptly following execution of this Letter. The document preservation notice will direct the preservation of all documents, data, electronically stored information, and tangible things relevant to the IRS Examination of TY 2017–2020, including but not limited to:
(a) intercompany agreements, amendments, and related correspondence;
(b) board and management meeting minutes, presentations, and resolutions relating to transfer pricing, the CSA, the PPC-PBI license agreement, and intercompany transactions;
(c) financial data, accounting records, and general ledger entries relating to intercompany transactions;
(d) transfer pricing documentation, studies, and analyses;
(e) communications with the IRS, Irish Revenue, or other taxing authorities;
(f) emails, instant messages, and other electronic communications relating to the foregoing; and
(g) any other documents or data that may be relevant to the IRS's examination of PPC's transfer pricing methodology.
PPC should ensure that all automatic deletion programs (including email retention policies and document destruction schedules) are suspended with respect to the categories of documents identified in the preservation notice for the duration of this engagement.
8.4 Privilege Logs
C&H will prepare and maintain privilege logs as necessary in connection with document productions to the IRS in response to IDRs. Privilege logs will identify documents withheld from production on the grounds of attorney-client privilege, the work-product doctrine, or the tax practitioner privilege under IRC § 7525, including for each withheld document: the date, author(s), recipient(s), a general description of the document's subject matter (without disclosing privileged content), and the basis for the privilege assertion.
C&H will consult with PPC regarding any challenges by the IRS to privilege claims and will take appropriate steps to protect PPC's privilege rights, including, if necessary, seeking judicial review of any IRS attempts to compel production of privileged materials.
9. Client Responsibilities
The success of this engagement will depend in significant part on the timely and full cooperation of PPC and its personnel. PPC agrees to the following responsibilities:
(a) Primary and Secondary Contacts. PPC will designate Marcus Whitfield, Vice President of Global Tax, as the primary client contact for day-to-day matters arising in connection with the Examination, including coordination of IDR responses, scheduling, and factual inquiries. PPC will designate Deborah Staines, General Counsel, as the secondary contact for legal and governance matters, including privilege issues, SEC disclosure considerations, and matters requiring escalation to PPC's executive leadership or board of directors.
(b) Access to Documents, Data, and Personnel. PPC will provide C&H with timely access to all documents, data, personnel, and information necessary to conduct the defense, including access to PBI's Managing Director (Aidan Naughton) and PBI personnel located in Dublin, Ireland. PPC will use its best efforts to respond to C&H's requests for information within the timeframes reasonably established by C&H in light of IRS deadlines.
(c) Prompt Notification of IRS Communications. PPC will notify C&H promptly — and in no event later than two (2) business days — of any communications received directly from the IRS or any other taxing authority relating to the Examination or to PPC's transfer pricing for TY 2017–2020, including any IDRs, summonses, notices, or other correspondence. PPC will also promptly notify C&H of any material developments affecting the Examination, including changes in PPC's business, operations, or corporate structure that may be relevant to the transfer pricing issues under review.
(d) Internal Approvals. PPC will obtain all necessary internal approvals, including from Chief Executive Officer Catherine Falk and Chief Financial Officer Rajesh Iyer as appropriate, for major strategic decisions in connection with the Examination, including decisions regarding the assertion or concession of positions, the initiation of a competent authority request, and any settlement or closing agreement with the IRS.
10. Conflicts of Interest
C&H has conducted a comprehensive conflicts check in accordance with the Firm's standard procedures and the applicable Rules of Professional Conduct. Based on that review, C&H has determined that it has no conflicts of interest that would preclude its representation of PPC in connection with this engagement.
The conflicts check encompassed PPC and its relevant affiliates, including PBI, PHL, and PMI; PPC's other advisors, including Crestfield & Associates LLP and Thornbury & Keogh; and relevant IRS personnel identified in the Letter 2205-A, including Supervisory Revenue Agent Gerald Meskill and Lead Revenue Agent Patricia Dunleavy.
C&H is a large law firm with offices throughout the United States and internationally. It is possible that C&H currently represents, has represented, or in the future will represent other clients in matters unrelated to this engagement. PPC acknowledges that C&H's representation of PPC in this engagement does not preclude C&H from representing other clients in matters unrelated to PPC's affairs, provided that such representation does not create a conflict of interest under the applicable Rules of Professional Conduct.
If a conflict of interest arises during the course of this engagement — whether due to C&H's representation of other clients, the acquisition of new clients, or other circumstances — C&H will promptly notify PPC and take appropriate steps in accordance with the applicable ethical rules, including, if necessary, seeking PPC's informed consent to continued representation, implementing appropriate ethical screens, or withdrawing from the engagement.
11. Termination
Either party may terminate this engagement at any time upon written notice to the other party. C&H may also withdraw from the engagement in accordance with the applicable Rules of Professional Conduct, including in circumstances where continued representation would result in a violation of ethical obligations or where PPC fails to fulfill its obligations under this Letter, including the timely payment of invoices.
Upon termination of this engagement by either party:
(a) PPC will be responsible for the payment of all fees and expenses incurred by C&H through the date of termination, including fees for time expended and expenses incurred but not yet billed;
(b) C&H will take reasonable steps to protect PPC's interests during any transition period, including the orderly transfer of the engagement file and work product to PPC or to successor counsel designated by PPC; and
(c) C&H will cooperate in the transition, including making its attorneys and personnel reasonably available to successor counsel for a reasonable period following termination to facilitate an orderly transfer of knowledge and responsibilities.
C&H's obligations regarding confidentiality, attorney-client privilege, and the protection of PPC's confidential information and privileged materials shall survive the termination of this engagement and shall remain in effect indefinitely.
12. File Retention
At the conclusion of this engagement, C&H will retain the engagement file — including correspondence, memoranda, work product, and related materials — for a period consistent with the Firm's document retention policy, which currently provides for retention of closed matter files for a period of seven (7) years from the date of matter closure.
PPC may request copies of the engagement file, or any portion thereof, at any time during this retention period. Upon expiration of the retention period, C&H may destroy the file in accordance with the Firm's standard procedures without further notice to PPC, unless PPC has requested return of the file or directed otherwise in writing.
PPC's original documents provided to C&H during the course of the engagement will be returned to PPC upon request at any time, whether before or after the conclusion of the engagement.
13. Governing Law
This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflicts of law. Any dispute arising out of or relating to this engagement letter or the services provided hereunder shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the County of New York or the United States District Court for the Southern District of New York.
14. Acceptance and Execution
We are honored that PPC has selected Calderwood & Harkness LLP to represent the Company in this important matter, and we look forward to working with you, Ms. Staines, and the PPC team throughout the course of this engagement.
If the foregoing terms and conditions are acceptable to PPC, please indicate your agreement by signing and returning a copy of this Letter to the undersigned. This Letter may be executed in counterparts, each of which shall be deemed an original, and may be delivered by electronic transmission (including PDF). Upon execution by both parties, this Letter shall constitute a binding agreement between C&H and PPC.
Please do not hesitate to contact Leonard Cross at (215) 492-7710 or Sylvia Hartwell at (212) 546-8045 if you have any questions regarding this Letter or the engagement generally.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Partner, Tax Department Responsible Partner Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 492-7710
Email: lcross@calderwoodharkness.com
By: ________
Sylvia Hartwell Partner, Tax Department Billing Partner Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 546-8045
Email: shartwell@calderwoodharkness.com
Date: ________
ACKNOWLEDGMENT AND AGREEMENT
The undersigned, on behalf of Penterra Pharmaceuticals Corp., hereby acknowledge and agree to the terms and conditions set forth in the foregoing Engagement Letter dated June 2, 2022.
PENTERRA PHARMACEUTICALS CORP.
By: ________
Name: Marcus Whitfield
Title: Vice President, Global Tax
Date: June 2, 2022
By: ________
Name: Deborah Staines
Title: General Counsel
Date: June 2, 2022
ENCLOSURES
The following enclosures are attached to and incorporated by reference into this Engagement Letter:
Enclosure A: 2022 Billing Rate Schedule (fee-schedule-2022.xlsx)
Enclosure B: Draft IRS Form 2848 — Power of Attorney and Declaration of Representative
Enclosure C: Matter Staffing Plan (matter-staffing-plan.docx)
Timekeeper | Title | 2022 Hourly Rate
Leonard Cross | Partner | $1,475
Sylvia Hartwell | Partner | $1,350
Garrett Simmons | Associate | $885
Leila Nazari | Associate | $695
Paralegals / Tax Analysts | — | $350 – $425

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGMENT AND AGREEMENT

PENTERRA PHARMACEUTICALS CORP.

ENCLOSURES

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