Contract analysis

I. Executive Summary The purpose of this memorandum is to provide a comprehensive analysis of the contested indemnification provisions in the draft Clinical Trial Agreement ("CTA") between Thornwick Medical Research Institute, Inc. ("TMRI") and Hargrove University Medical Center, Inc. ("HUMC") for the Cadence-3 Trial. The Cobalt Ridge Health IT-3 Trial is a prospective, single-arm, open-label feasibility study of the

1. Scope of Indemnification — the triggering events and causal standards defining when TMRI's indemnification obligation arises;

2. Aggregate Indemnification Cap — the maximum dollar amount of TMRI's indemnification exposure over the life of the CTA;

3. Notice Period for Claims — the time frame within which HUMC must notify TMRI of claims or threatened claims triggering indemnification;

4. Defense Control and Right to Participate — the allocation of authority over the defense and settlement of indemnified claims, including HUMC's right to engage separate counsel; and

5. Mutual Indemnification Standard — the applicable standard of conduct (ordinary negligence versus gross negligence) governing HUMC's reciprocal indemnification obligation to TMRI, and the treatment of protocol deviations and informed consent failures. For each sub-issue, we set forth TMRI's current draft position, HUMC's redline position, a comparative analysis grounded in Massachusetts law and industry practice, a

II. Background and Procedural History A. The Cadence-3 Trial Cobalt Ridge Health IT-3 is TMRI's third investigator-initiated feasibility study evaluating the ThornValve MV-200 System, a transcatheter mitral valve repair device designed for percutaneous treatment of moderate-to-severe mitral regurgitation. The ThornValve MV-200 System is a proprietary device developed by TMRI's Cardiovascular Device Division and is cu

III. Comparison of the Parties' Indemnification Positions This section provides a detailed comparison of the parties' positions on each of the five contested sub-issues within the indemnification article, together with our analysis of the merits of each position and the relevant legal and practical considerations. A. Scope of Indemnification

1. TMRI's Position (Current Draft — January 28, 2026) Under the initial draft CTA circulated by Calderwood & Harkness, TMRI will provide indemnification to HUMC, the Principal Investigator (Dr. Castañeda), the Sub-Investigator (Dr. Forsberg), and HUMC's authorized study staff who are directly involved in the conduct of the Cobalt Ridge Health IT-3 Trial (collectively, the "Indemnified Parties"). The indemnification o

2. HUMC's Position (PY&C Redline — February 7, 2026) The PY&C redline substantially expands the scope of TMRI's indemnification obligation. Under the redline, TMRI would indemnify the Indemnified Parties for all third-party claims "arising out of or relating to" the investigational device, "including but not limited to" claims based on: (a) The design, manufacture, defect, labeling, instructions for use, or any chara

3. Analysis. The breadth of HUMC's proposed "arising out of or relating to" language, coupled with the expansive illustrative list, would expose TMRI to indemnification obligations in circumstances where the ThornValve MV-200 System performed exactly as designed but a patient nonetheless experienced an adverse clinical outcome. In the context of a feasibility study involving a novel transcatheter device in patients w

1. TMRI's Position (Current Draft — January 28, 2026) The initial draft CTA proposes an aggregate indemnification cap of $10,000,000. This figure was selected to match the per-occurrence limit under TMRI's clinical trial liability insurance policy with Commonwealth Specialty Underwriters, Inc. (Policy No. CTL-2025-08843), which provides coverage of $10,000,000 per occurrence and $25,000,000 in the aggregate for the p

2. HUMC's Position (PY&C Redline — February 7, 2026) HUMC proposes two alternative positions on the aggregate cap, either of which it considers acceptable: (a) Primary position: Remove the aggregate cap entirely, resulting in an uncapped indemnification obligation; or (b) Alternative position: Increase the aggregate cap to $25,000,000, matching TMRI's aggregate policy limit under the Commonwealth Specialty policy. In

3. Analysis. HUMC's primary position — uncapped indemnification — is inappropriate for a nonprofit sponsor and inconsistent with prevailing industry norms for investigator-initiated clinical trial agreements. An uncapped indemnification obligation would expose TMRI to theoretically unlimited financial liability, which is fundamentally incompatible with the fiduciary obligations of TMRI's directors and officers to man

1. TMRI's Position (Current Draft — January 28, 2026) The initial draft CTA requires HUMC to provide prompt written notice to TMRI within fifteen (15) business days of the date on which HUMC first obtains knowledge of a claim or threatened claim that may give rise to an indemnification obligation under the CTA. The notice must include a description of the claim, the identity of the claimant, the amount of damages sou

2. HUMC's Position (PY&C Redline — February 7, 2026) HUMC's redline extends the notice period to thirty (30) business days. In PY&C's cover letter, Mr. Huang explains that HUMC's internal processes for identifying and escalating potential claims involve multiple layers of review and approval, including initial assessment by HUMC's Office of Risk Management, review by the legal department under the supervision of HUMC

3. Analysis. Both positions have merit, and this issue lends itself to compromise. Fifteen business days (equivalent to approximately three calendar weeks) is an aggressive notice period for an academic medical center with the organizational complexity of HUMC. Large teaching hospitals and research institutions typically have multi-tiered risk management structures in which potential claims must be identified, evalua

1. TMRI's Position (Current Draft — January 28, 2026) Under the initial draft CTA, TMRI has the sole right to control the defense and settlement of any claim for which indemnification is sought under the agreement. This includes the right to select defense counsel, direct litigation strategy, make all tactical and strategic decisions in the course of the defense, and exercise full settlement authority, including the

2. HUMC's Position (PY&C Redline — February 7, 2026) HUMC does not dispute TMRI's right to control the defense in the ordinary course. However, PY&C's redline adds a provision granting HUMC the right to participate in the defense through separate counsel at TMRI's expense if a conflict of interest exists between TMRI and HUMC, or between TMRI and the Principal Investigator or Sub-Investigator. In PY&C's cover letter,

3. Analysis. HUMC's request for the right to participate in the defense with separate counsel at TMRI's expense when a conflict of interest exists is a well-recognized provision in clinical trial agreements involving academic medical centers, and it is defensible from HUMC's perspective. The concern underlying this request is that TMRI's interests as both device developer and trial sponsor may, in certain claim scena

1. TMRI's Position (Current Draft — January 28, 2026) Under the initial draft CTA, HUMC will indemnify TMRI and its directors, officers, employees, and agents for third-party claims arising from: (a) HUMC's negligence or willful misconduct in performing its obligations under the CTA; (b) The PI's or Sub-Investigator's negligence or willful misconduct in the conduct of the Cobalt Ridge Health IT-3 Trial; (c) Any mater

2. HUMC's Position (PY&C Redline — February 7, 2026) HUMC's redline narrows the reciprocal indemnification in two significant ways: First, HUMC replaces the ordinary negligence standard with a gross negligence/willful misconduct standard. Under HUMC's proposed language, HUMC would indemnify TMRI only for claims arising from HUMC's or its personnel's "gross negligence or willful misconduct" in the performance of their

3. Analysis. The gap between ordinary negligence and gross negligence is significant under Massachusetts law, which will govern the CTA. Ordinary negligence requires only a showing that the defendant failed to exercise the degree of care that a reasonably prudent person would exercise under similar circumstances. Gross negligence, by contrast, requires a showing of conduct that amounts to "a heedless and palpable vio

IV. Massachusetts Law Considerations A. Contractual Indemnification Under Massachusetts Law The CTA designates Massachusetts as the governing law, and this choice of law will control the interpretation and enforcement of the indemnification provisions. Massachusetts law generally enforces contractual indemnification provisions as a matter of freedom of contract, including provisions in which one party agrees to indem

V. Insurance Coverage Alignment Analysis A. TMRI's Clinical Trial Liability Insurance TMRI's clinical trial liability insurance is provided by Commonwealth Specialty Underwriters, Inc. under Policy No. CTL-2025-08843. The key terms of the policy are as follows: The policy period of January 1, 2026, through December 31, 2027, covers the anticipated enrollment period of the Cobalt Ridge Health IT-3 Trial (estimated fir

VI. Industry Precedents and Risk Allocation in Clinical Trial Agreements A. Standard Practices in Investigator-Initiated Trial CTAs The risk allocation framework in clinical trial agreements varies significantly depending on the nature of the trial, the identity of the sponsor, and the respective roles of the parties. In sponsor-initiated industry trials — where a commercial device or pharmaceutical company sponsors