Contract analysis

ARTICLE I — DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings set forth below: "APA" means the Asset Purchase Agreement, dated as of May 11, 2023, by and between Seller and Buyer, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms. "Buyer" means Meridian Precision Diagnostics, Inc., a Delaware corporation, with its princ

ARTICLE II — MILESTONES AND EARNOUT PAYMENTS

Section 2.1 — Milestone 1. (a) Milestone 1 shall be deemed achieved upon the earlier of: (i) FDA clearance of the OncuPath-HER3™ Assay (or a Successor Assay) through the 510(k) premarket notification pathway or the de novo classification request pathway, as a companion diagnostic for any FDA-approved therapeutic agent; or (ii) FDA approval of the OncuPath-HER3™ Assay (or a Successor Assay) through the PMA pathway, in

Section 2.2 — Milestone 2. (a) Milestone 2 shall be deemed achieved upon the satisfaction of both of the following conditions: (i) CMS shall have issued a unique HCPCS code specifically designated for the OncuPath-HER3™ Assay (or a Successor Assay), which code shall be effective and available for use by clinical laboratories and healthcare providers for billing and reimbursement purposes; and (ii) Buyer (or its desig

Section 2.3 — Maximum Earnout. The aggregate maximum Earnout Payments payable by Buyer to Seller under this Agreement shall not exceed Fourteen Million Dollars ($14,000,000), consisting of the Milestone 1 Payment of Eight Million Dollars ($8,000,000) and the Milestone 2 Payment of Six Million Dollars ($6,000,000). There shall be no duplication of payments; each Milestone may be achieved and the corresponding Mileston

Section 2.4 — Expiration of Milestones. (a) If Milestone 1 is not achieved on or before August 8, 2025 (the Milestone 1 Deadline), no Milestone 1 Payment shall be due or payable, and Buyer shall have no further obligation to Seller with respect to the Milestone 1 Payment, except as may otherwise be provided in Article VI (Acceleration Provisions) or Article VII (Anti-Embarrassment and Anti-Sandbagging Protections). (

ARTICLE III — PAYMENT MECHANICS

Section 3.1 — Notification of Milestone Achievement. Within ten (10) business days following the achievement of either Milestone, Buyer shall deliver to Seller a written notice (a "Milestone Achievement Notice") setting forth in reasonable detail the basis for Buyer's determination that such Milestone has been achieved. Each Milestone Achievement Notice shall include, as applicable: (a) copies of all relevant FDA cor

Section 3.2 — Payment Timing. (a) Buyer shall pay the applicable Milestone Payment to Seller within thirty (30) calendar days following delivery of the Milestone Achievement Notice to Seller (or, in the event of a dispute, within ten (10) business days following the final resolution of such dispute in favor of Milestone achievement). (b) All Milestone Payments shall be made by wire transfer of immediately available f

Section 3.3 — Tax Treatment of Earnout Payments. (a) The Parties agree that, for United States federal and applicable state and local income tax purposes, the Earnout Payments shall be treated as additional purchase price for the Purchased Assets (as defined in the APA). Neither Party shall take any position on any tax return, report, or other filing that is inconsistent with such treatment, unless required to do so

Section 3.4 — No Interest. No interest shall accrue on any Earnout Payment amount during the period between the achievement of the applicable Milestone and the date on which such payment is due under Section 3.2. Notwithstanding the foregoing, if Buyer fails to make any Milestone Payment when due under this Agreement (including following the resolution of any dispute in favor of Milestone achievement), interest shall

Section 3.5 — No Set-Off. Buyer shall not have the right to set off, deduct, counterclaim, or withhold any Earnout Payment (or any portion thereof) against or on account of any indemnification claims, losses, damages, liabilities, or other amounts that may be owed by Seller to Buyer under the APA, any ancillary agreement, or otherwise. The Earnout Payments are independent of and separate from the escrow and indemnifi

ARTICLE IV — COMMERCIALLY REASONABLE EFFORTS OBLIGATIONS

Section 4.1 — Buyer's Obligations. During the Earnout Period, Buyer shall use Commercially Reasonable Efforts to achieve each Milestone on or before the applicable Milestone Deadline. Without limiting the generality of the foregoing, Commercially Reasonable Efforts shall include, at a minimum, the following: (a) Regulatory Strategy. Continuing and diligently pursuing the regulatory strategy for the OncuPath-HER3™ PMA

Section 4.2 — Limitations on Buyer's Obligations. Notwithstanding anything to the contrary in Section 4.1, Commercially Reasonable Efforts shall not require Buyer to: (a) Take any action that would be contrary to the reasonable business judgment of Buyer's management, as exercised in good faith and consistently with the fiduciary duties of Buyer's board of directors and officers; (b) Incur costs or expenses materiall

Section 4.3 — Reporting Obligations. (a) During the Earnout Period, Buyer shall provide Seller with written quarterly reports summarizing the status of Buyer's efforts toward the achievement of each unachieved Milestone (each, a "Quarterly Report"). Each Quarterly Report shall include, at a minimum: (i) a summary of all material regulatory interactions with the FDA and CMS during the applicable quarter relating to th

Section 4.4 — Books and Records Access. (a) Buyer shall maintain complete, accurate, and detailed books and records relating to its efforts to achieve the Milestones, including without limitation records of regulatory submissions, FDA and CMS correspondence, internal development reports, staffing records, budget allocations, and laboratory operations data relevant to the OncuPath-HER3™ Assay. (b) During the Earnout P

ARTICLE V — DISPUTE RESOLUTION

Section 5.1 — Good Faith Negotiations. Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or validity thereof (each, a "Dispute"), shall first be submitted to good faith negotiation between senior executives of the Parties. The Party asserting the Dispute shall deliver written notice thereof to the other Party (a "Dispute Notice"), describing in reasonable det

Section 5.2 — Mediation. If the Dispute is not resolved within the Negotiation Period, either Party may, by written notice to the other Party, submit the Dispute to non-binding mediation administered by JAMS, Inc. ("JAMS") in San Diego, California. The mediation shall be conducted in accordance with the JAMS Mediation Rules in effect at the time of commencement of the mediation. The Parties shall cooperate in good fa

Section 5.3 — Binding Arbitration. (a) If the Dispute is not resolved through mediation within the Mediation Period (or if either Party declines to participate in mediation after the expiration of the Negotiation Period), either Party may submit the Dispute to final and binding arbitration administered by JAMS in accordance with its Comprehensive Arbitration Rules and Procedures then in effect. (b) The arbitration sh

Section 5.4 — Specific Performance. The Parties acknowledge and agree that a breach by Buyer of its Commercially Reasonable Efforts obligations under Article IV, or a breach by Buyer of the anti-sandbagging or anti-embarrassment provisions of Article VII, may cause irreparable harm to Seller for which monetary damages alone would be inadequate. Accordingly, Seller shall be entitled to seek specific performance and in

Section 5.5 — Disputes Regarding Milestone Achievement. (a) Disputes regarding whether a particular Milestone has been achieved shall be determined based on objective criteria, as follows: (i) Milestone 1: Milestone 1 shall be deemed achieved upon the issuance by the FDA of a clearance letter (in the case of a 510(k) or de novo pathway) or an approval letter or approval order (in the case of a PMA or PMA supplement p

ARTICLE VI — ACCELERATION PROVISIONS

Section 6.1 — Acceleration on Buyer Change of Control. If a Change of Control of Buyer occurs during the Earnout Period and prior to the achievement of either or both Milestones, then all unachieved Milestones shall be deemed achieved immediately prior to the consummation of such Change of Control, and Buyer (or its successor or acquirer, as the case may be) shall pay to Seller the full amount of any unpaid Milestone

Section 6.2 — Acceleration on Sale or Divestiture of OncuPath Business. (a) If, during the Earnout Period, Buyer sells, assigns, licenses (on an exclusive basis), or otherwise divests or transfers all or substantially all of the OncuPath Business, or the OncuPath-HER3™ Assay specifically (including all related intellectual property, regulatory submissions, and know-how), to any third party (each, a "Divestiture"), th

Section 6.3 — No Acceleration for Internal Restructuring. The acceleration provisions of Sections 6.1 and 6.2 shall not apply to any internal corporate restructuring, reorganization, or transfer of the OncuPath Business (or any portion thereof) among Buyer and its wholly-owned subsidiaries, provided that: (a) Buyer delivers prior written notice of any such restructuring or transfer to Seller; (b) Buyer remains fully

ARTICLE VII — ANTI-EMBARRASSMENT AND ANTI-SANDBAGGING PROTECTIONS

Section 7.1 — Anti-Sandbagging. Buyer shall not take any action, or fail to take any action, with the primary purpose or intent of preventing, impeding, or delaying the achievement of either Milestone in order to avoid the payment of the applicable Earnout Payment. Any deliberate frustration, obstruction, or delay of Milestone achievement by Buyer shall constitute a material breach of this Agreement, and the affected

Section 7.2 — Anti-Embarrassment — Discontinuation. If, during the Earnout Period, Buyer discontinues, abandons, or materially curtails the development of the OncuPath-HER3™ Assay (or any Successor Assay) for any reason other than: (a) a bona fide safety concern substantiated by clinical data demonstrating an unacceptable risk-benefit profile for patients; (b) an FDA determination, communicated in writing, that the O

Section 7.3 — Anti-Embarrassment — Competing Products. During the Earnout Period, Buyer shall not develop, commercialize, or launch (or cause any of its affiliates to develop, commercialize, or launch) a companion diagnostic assay that directly competes with the OncuPath-HER3™ Assay in the same clinical indication and therapeutic pairing in a manner that materially and adversely affects the prospects for achieving th

Section 7.4 — Negative Covenants During Earnout Period. Without limiting the generality of the foregoing provisions of this Article VII, during the Earnout Period, Buyer shall not, without Seller's prior written consent (which consent shall not be unreasonably withheld, conditioned, or delayed, except as otherwise specified below): (a) Materially reduce the development budget for the OncuPath-HER3™ program below the

ARTICLE VIII — SELLER'S POST-CLOSING COOPERATION

Section 8.1 — Cooperation Obligations. Seller shall cooperate reasonably and in good faith with Buyer in connection with Buyer's efforts to achieve the Milestones during the Earnout Period. Such cooperation shall include, without limitation: (a) Personnel Access. Making available to Buyer (for reasonable periods during normal business hours and upon reasonable prior notice) Seller's retained employees who have knowle

Section 8.2 — Limitation on Seller's Cooperation. (a) Seller's cooperation obligations under this Article VIII shall not require Seller to incur out-of-pocket costs or expenses in excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate during the Earnout Period without Buyer's prior agreement to reimburse such costs. Out-of-pocket costs in excess of such amount shall be borne by Buyer upon presentation of r

ARTICLE IX — REPRESENTATIONS AND WARRANTIES

Section 9.1 — Seller's Representations. Seller hereby represents and warrants to Buyer as of the date hereof as follows: (a) Corporate Power and Authority. Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Seller has the requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement. (b) Authorization.

Section 9.2 — Buyer's Representations. Buyer hereby represents and warrants to Seller as of the date hereof as follows: (a) Corporate Power and Authority. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Buyer has the requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement. (b) Authorization. Th

ARTICLE X — INDEMNIFICATION RELATIONSHIP

Section 10.1 — Relationship to APA Indemnification. (a) This Earnout Agreement is an exhibit to and forms a part of the APA. The Parties acknowledge that the APA contains separate and independent indemnification provisions (set forth in Article IX of the APA) that govern the allocation of losses, damages, and liabilities arising from breaches of representations, warranties, and covenants under the APA. (b) Except as

Section 10.2 — R&W Insurance. The Parties acknowledge that the buyer-side representations and warranties insurance policy issued by Apex Mutual Insurance Company (Policy No. RWI-2023-07182), with a coverage limit of Twenty-Eight Million Dollars ($28,000,000) and a retention of One Million Four Hundred Thousand Dollars ($1,400,000), was obtained by Buyer in connection with the transactions contemplated by the APA. Suc

ARTICLE XI — TERM AND TERMINATION

Section 11.1 — Term. This Agreement shall become effective as of the Closing Date (August 8, 2023) and shall remain in full force and effect until the earliest of: (a) the date on which both Milestone Payments have been paid to Seller in full in accordance with Article III; (b) the expiration of the Earnout Period on August 8, 2026, with respect to any unachieved Milestones (subject to the continuation of this Agreem

Section 11.2 — Survival of Certain Provisions. The following provisions of this Agreement shall survive the termination or expiration of this Agreement and shall continue in full force and effect in accordance with their respective terms: Article V (Dispute Resolution), Section 3.3 (Tax Treatment of Earnout Payments), Section 3.4 (No Interest; Interest on Late Payments), Section 4.4 (Books and Records Access, which s

ARTICLE XII — GENERAL PROVISIONS

Section 12.1 — Governing Law. This Agreement and all Disputes arising out of or relating to this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other

Section 12.2 — Notices. All notices, requests, demands, consents, waivers, and other communications required or permitted under this Agreement shall be in writing and shall be delivered: (a) by hand delivery; (b) by nationally recognized overnight courier service (with tracking capability); (c) by registered or certified mail, return receipt requested, postage prepaid; or (d) by electronic mail (with confirmation of

Section 12.3 — Assignment. Neither Party may assign, transfer, or delegate its rights, interests, or obligations under this Agreement, in whole or in part, without the prior written consent of the other Party, and any purported assignment, transfer, or delegation without such consent shall be null and void; provided, however, that: (a) Buyer may assign its rights and obligations under this Agreement to a wholly-owned

Section 12.4 — Entire Agreement; Amendment. This Earnout Agreement, together with the APA and the other ancillary agreements, exhibits, schedules, and instruments referenced therein or delivered in connection therewith, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions, whe

Section 12.5 — Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the Party against whom enforcement of such waiver is sought. No single or partial exercise of any right, remedy, power, or privilege under this Agreement shall preclude any other or further exercise thereof, or the exercise of any other right, remedy, power, or privilege. The failure of either Party

Section 12.6 — Severability. If a