Contract analysis

I. Executive Summary This memorandum analyzes the employee transfer mechanics arising in connection with the proposed $140,000,000 asset purchase of the OncuPath™ companion diagnostics assay line (the "OncuPath Business") by Meridian Precision Diagnostics, Inc. ("Meridian" or "Buyer") from Genome Dx Therapeutics Inc. ("GDT" or "Seller"), pursuant to that certain Asset Purchase Agreement dated May 11, 2023 (the "APA")

II. Transaction Structure — Employment Implications A. Asset Purchase Framework The transaction is structured as an asset purchase agreement governed by the laws of the State of Delaware. Under the APA, Meridian is acquiring substantially all of the assets used in or related to the OncuPath Business, including intellectual property, regulatory authorizations, customer contracts, laboratory equipment, inventory, and t

Article VII of the APA (Employee Matters) establishes the framework for the employee transfer. Specifically, Section 7.1 of the APA requires Meridian to make offers of employment to all eighty-three (83) employees who are exclusively dedicated to the OncuPath Business as of the date of the APA. The offers must be on terms that are, in the aggregate, no less favorable than the employees' current terms of employment wi

Section 7.1(b) of the APA requires that Meridian extend its offers of employment no later than fifteen (15) business days prior to the Closing Date. Meridian satisfied this requirement by distributing offer letters to all eighty-three (83) OncuPath Business employees on July 14, 2023, which was seventeen (17) business days prior to the anticipated August 8, 2023 Closing Date. The offer letters were reviewed by Calder

III. WARN Act Compliance Analysis A. Federal WARN Act (Worker Adjustment and Retraining Notification Act) The federal WARN Act, codified at 29 U.S.C. §§ 2101–2109 and implemented by regulations at 20 C.F.R. Part 639, requires employers with one hundred (100) or more full-time employees to provide at least sixty (60) calendar days' advance written notice to affected employees, their representatives (if any), and speci

1. Fewer than 100 employees affected at any single site. The OncuPath workforce of eighty-three (83) employees is distributed across two (2) separate facilities, with approximately sixty-five (65) at the San Diego location and approximately eighteen (18) at the Carlsbad location. Neither facility has one hundred (100) or more affected employees. Moreover, GDT as a whole employs well over one hundred (100) employees,

2. No "plant closing." The OncuPath facilities are not being permanently or temporarily shut down. Rather, they will continue to operate under Meridian's management following the closing. The operations, equipment, and workforce at these facilities are being transferred as a going concern. Accordingly, the transaction does not constitute a "plant closing" within the meaning of the WARN Act.

3. No "employment loss." The seventy-eight (78) Transferred Employees are being offered comparable employment with Meridian at the same work locations, with no material change in job duties, base salary, or benefits. Under the Department of Labor's implementing regulations, when employees are offered employment by a successor employer under comparable terms and conditions, they do not experience an "employment loss"

4. Threshold not met for non-transferring employees. Even if the five (5) non-transferring employees who declined Meridian's offers were deemed to have experienced an "employment loss" (which we do not believe they have, since they are being retained by GDT and offered alternative positions), five (5) employees is well below the fifty (50)-employee threshold required to trigger either the "plant closing" or "mass lay

IV. Benefits Tail Coverage A. Health and Welfare Benefits Transferred Employees' participation in GDT-sponsored group health plans — including GDT's self-insured medical plan (administered by Crestline Insurance), the GDT dental plan (administered by Halcyon Indemnity Co.), and the GDT vision plan (administered by VSP) — will terminate at 11:59 p.m. Pacific Time on August 7, 2023, the last day of their employment wit

V. COBRA Obligations A. General COBRA Framework The Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as codified at 29 U.S.C. § 4980B and related provisions of the Internal Revenue Code (Sections 4980B, 6720C) and the Employee Retirement Income Security Act of 1974 (ERISA, Section 601 et seq.), requires group health plans maintained by employers with twenty (20) or more employees to offer "continuati

VI. PTO Accrual Assumptions and Payout A. California Law Requirements Under California Labor Code Section 227.3, accrued and unused vacation or PTO is considered "earned wages" and must be paid out to an employee upon termination of employment, regardless of the reason for termination. California law does not permit "use-it-or-lose-it" vacation or PTO policies. Vacation or PTO vests proportionately as it is earned by

Section 7.4 of the APA provides that Meridian will credit each Transferred Employee with a starting PTO balance under Meridian's PTO policy that recognizes the Transferred Employee's prior service with GDT for purposes of determining the applicable PTO accrual rate tier. For example, a Transferred Employee with eight (8) years of service at GDT would be placed in the corresponding accrual rate tier under Meridian's P

VII. Payroll Transition and TSA Coordination A. Transition Services Agreement — HR/Payroll Services Pursuant to the Transition Services Agreement dated August 8, 2023 (the "TSA"), GDT will provide certain human resources and payroll transition services to Meridian for a period of up to nine (9) months following the Closing Date (i.e., through approximately May 8, 2024). The TSA pricing for HR/payroll services is at G

VIII. Service Credit and Seniority

Section 7.5 of the APA provides that Meridian will recognize each Transferred Employee's prior service with GDT for the following purposes: (a) 401(k) Plan Eligibility and Vesting. Although the GDT 401(k) Plan provides immediate vesting, Meridian will credit Transferred Employees' GDT service for purposes of satisfying any eligibility or vesting requirements under the Meridian 401(k) Plan. As noted in Section IV.C ab

IX. Non-Compete and Non-Solicitation Considerations Pursuant to the Non-Competition and Non-Solicitation Agreement (the "Restrictive Covenant Agreement") executed by GDT and Meridian concurrently with the closing of the APA, GDT is subject to certain restrictive covenants that are relevant to the employee transfer mechanics: Employee Non-Solicitation Covenant. Section 3(b) of the Restrictive Covenant Agreement prohib

X. Key Employee Retention and Transition Incentives To ensure the continuity of critical leadership through the transaction and post-closing transition period, GDT, at the direction of Pinnacle Biosciences Partners Fund III, L.P. ("Pinnacle"), GDT's majority stockholder, offered retention bonuses to three (3) key OncuPath employees. These retention arrangements were designed to incentivize the acceptance of Meridian'

XI. Coordination with Meridian's HR Team Calderwood & Harkness has worked closely with Meridian's outside counsel, Whitfield Sayer & Gregg LLP ("WSG"), throughout the employee transfer process. The primary contacts at WSG are Jonathan Whitfield (lead partner) and Rachel Dempsey (senior associate). In addition, Meridian's VP of Corporate Development, Catherine Liang, has served as the primary business-side contact for