CALDERWOOD & HARKNESS LLP Attorneys at Law
555 South Hope Street, Suite 4400 Los Angeles, California 90071
Telephone: (213) 486-7200 Facsimile: (213) 486-7201 www.calderwoodharkness.com
August 7, 2023
VIA ELECTRONIC MAIL AND OVERNIGHT COURIER
Samantha Koh, Vice President Ashgrove Equity Partners Escrow Services, Inc. 101 California Street, Suite 1250 San Francisco, California 94111
Re: Escrow Instructions — OncuPath™ Asset Divestiture Escrow Agreement among Genome Dx Therapeutics Inc., Meridian Precision Diagnostics, Inc., and Ashgrove Equity Partners Escrow Services, Inc. Ashgrove Equity Partners Escrow Account No. 8841-7023-5500 Calderwood & Harkness LLP Matter No. 1013-00006&A-4471
Dear Ms. Koh:
1. Introduction and Purpose
This firm represents Genome Dx Therapeutics Inc., a Delaware corporation ("Seller" or "GDT"), in connection with the sale of GDT's OncuPath™ companion diagnostics assay line to Meridian Precision Diagnostics, Inc., a Delaware corporation ("Buyer" or "Meridian"), pursuant to that certain Asset Purchase Agreement dated May 11, 2023, by and between GDT and Meridian (the "APA"). As you are aware, Ashgrove Equity Partners Escrow Services, Inc. ("Ashgrove Equity Partners" or the "Escrow Agent") has been designated as the Escrow Agent under the escrow agreement executed in connection with the APA.
The purpose of this letter is twofold: first, to transmit to you the fully executed Escrow Agreement (as defined below) for Ashgrove Equity Partners's countersignature; and second, to provide and confirm the wire transfer instructions for the escrow deposit in advance of the anticipated closing of the transaction, which is expected to occur on August 8, 2023 (the "Closing Date"). We respectfully request your prompt attention to the matters set forth herein so that the parties may proceed to closing in an orderly and timely manner.
2. Transmittal of Executed Escrow Agreement
Enclosed with this letter for your review and countersignature are two (2) fully executed counterpart originals of the Escrow Agreement dated May 11, 2023 (effective as of the Closing Date), among GDT, as Seller, Meridian, as Buyer, and Ashgrove Equity Partners Escrow Services, Inc., as Escrow Agent (the "Escrow Agreement"). The Escrow Agreement was executed concurrently with the APA on May 11, 2023; however, its effectiveness is expressly conditioned upon the occurrence of the Closing (as defined in the APA). Accordingly, the Escrow Agreement will become effective and operative upon the Closing Date, which is anticipated to be August 8, 2023.
We kindly request both counterpart originals and return one (1) fully executed counterpart to Calderwood & Harkness LLP at the address set forth in the letterhead above, to the attention of the undersigned, Tiffany Rosenthal. The second fully executed counterpart should be retained by Ashgrove Equity Partners for its files. Please confirm by return email upon execution that the countersigned originals have been dispatched.
3. Escrow Deposit Amount and Funding
Pursuant to the terms of the APA and the Escrow Agreement, the total escrow deposit amount is Fourteen Million Dollars ($14,000,000) (the "Escrow Deposit"). The Escrow Deposit represents ten percent (10%) of the Total Consideration of One Hundred Forty Million Dollars ($140,000,000) payable by the Buyer to the Seller under the APA. The Escrow Deposit is intended to secure the Seller's indemnification obligations under Article IX of the APA, as more particularly described in the Escrow Agreement.
With respect to funding mechanics, the Escrow Deposit will be wired by Meridian (as Buyer) on the Closing Date, which is anticipated to be August 8, 2023. Under the terms of the APA, the aggregate closing cash payment from Buyer to Seller is One Hundred Twenty-Six Million Dollars ($126,000,000), which is calculated as the Total Consideration of $140,000,000 less the Escrow Deposit of $14,000,000. Specifically, Fourteen Million Dollars ($14,000,000) of the Total Consideration will be directed by the Buyer (or by Buyer's acquisition financing lender on Buyer's behalf) directly to the segregated escrow account established by Ashgrove Equity Partners, rather than to GDT, in accordance with the Closing Funds Flow Memorandum to be circulated among the parties and their respective counsel prior to the Closing.
The Escrow Deposit should be deposited into the segregated Ashgrove Equity Partners Escrow Account No. 8841-7023-5500, which has been established for this purpose. Please confirm that this account has been established and is ready to receive funds in the amount specified above.
4. Wire Transfer Instructions for Escrow Deposit
In order to facilitate the timely transfer of the Escrow Deposit on the Closing Date, we respectfully request the following wire transfer instructions for receipt of the Escrow Deposit into Account No. 8841-7023-5500:
Please note that upon receipt of the confirmed wire instructions from Ashgrove Equity Partners, we will promptly transmit such instructions to the following parties for purposes of facilitating the closing-date transfer:
(a) Buyer's counsel, Whitfield Sayer & Gregg LLP, 200 South Tryon Street, Suite 2800, Charlotte, North Carolina 28202, Attention: Jonathan Whitfield, Esq. and Rachel Dempsey, Esq.; and
(b) Buyer's acquisition financing lender, Summit National Bank, N.A., Attention: Karen Delacroix, Senior Vice President, Healthcare Lending Group.
Given the anticipated Closing Date of August 8, 2023, and the need to incorporate these wire instructions into the Closing Funds Flow Memorandum currently being finalized among the parties, we respectfully request the foregoing wire instructions no later than 12:00 p.m. Pacific Time on August 7, 2023. Timely confirmation of these instructions is critical to ensuring that all parties and their respective financial institutions are prepared to effect the simultaneous fund transfers required at the Closing.
5. Escrow Release Schedule
For Ashgrove Equity Partners's reference and for purposes of operational setup and internal calendaring, we provide below a summary of the escrow release mechanics as set forth in the Escrow Agreement:
First Release. Fifty percent (50%) of the then-remaining escrow balance shall be released to GDT (Seller) on the date that is twelve (12) months after the Closing Date — that is, on or about August 8, 2024 (the "First Release Date"). The amount released on the First Release Date shall be net of any amounts that are then subject to pending and unresolved indemnification claims submitted in accordance with the claim procedures set forth in the Escrow Agreement. For the avoidance of doubt, if any indemnification claims have been submitted prior to the First Release Date and remain unresolved as of such date, the portion of the escrow balance attributable to such pending claims shall be retained in escrow, and only the remaining fifty percent (50%) of the unreserved balance shall be released to GDT.
Final Release. The remaining escrow balance shall be released to GDT (Seller) on the date of expiration of the Survival Period — that is, on or about February 8, 2025, which is eighteen (18) months after the Closing Date (the "Final Release Date"). The amount released on the Final Release Date shall be net of any amounts reserved for pending and unresolved indemnification claims as of such date. Any amounts retained in escrow on account of pending claims at the time of the Final Release shall continue to be held by the Escrow Agent until the final resolution of such claims in accordance with the claim procedures set forth in the Escrow Agreement.
Upon final resolution of all pending claims (whether by mutual agreement of the parties, settlement, or final, non-appealable court order), any remaining escrow funds not applied to satisfied claims shall be promptly released to GDT in accordance with the terms of the Escrow Agreement. We would appreciate confirmation from Ashgrove Equity Partners that the First Release Date and the Final Release Date have been noted in Ashgrove Equity Partners's internal systems and calendaring procedures.
6. Investment of Escrowed Funds
Pursuant to Section 4.2 of the Escrow Agreement, the escrowed funds shall be invested in "Permitted Investments" as defined therein. As set forth in the Escrow Agreement, Permitted Investments generally include: (i) direct obligations of, or obligations guaranteed by, the United States of America with maturities of ninety (90) days or less; (ii) money market funds that invest exclusively in obligations of the United States government or agencies thereof, with a rating of at least "AAAm" by Standard & Poor's or the equivalent; or (iii) FDIC-insured interest-bearing deposit accounts at commercial banks with total assets in excess of $10 billion.
All interest and earnings on the escrowed funds shall be allocated and reported for tax purposes in accordance with the terms of the Escrow Agreement. Specifically, as set forth therein, all interest and earnings shall be treated as income of GDT (Seller) for federal, state, and local tax purposes, subject to any applicable withholding requirements.
We respectfully request the default investment vehicle that will be used for the escrowed funds upon receipt of the Escrow Deposit. If Ashgrove Equity Partners's standard default investment differs from the categories of Permitted Investments described above, please advise us promptly so that the parties may provide appropriate written investment instructions.
7. Claim Procedures — Overview
For ease of reference, we briefly summarize the claim procedures under the Escrow Agreement. Any indemnification claim against the escrow must be submitted by the claiming party (anticipated to be Buyer, as the party entitled to indemnification under Article IX of the APA) via written notice delivered to both the Escrow Agent and the non-claiming party. Such written notice must specify the nature and factual basis of the claim, the provision(s) of the APA giving rise to the claim, and the amount of the claimed loss or, if the amount is not then determinable, a good faith estimate thereof.
The Escrow Agent shall not release any disputed funds from the escrow account without either: (a) joint written instructions executed by both Seller and Buyer directing such release; or (b) a final, non-appealable order of a court of competent jurisdiction directing such release. In no event shall the Escrow Agent be required to make any determination as to the merits of any claim or the validity of any indemnification demand.
The detailed claim procedures, including response periods, dispute escalation mechanisms, and procedures for partial releases, are set forth in full in the Escrow Agreement enclosed herewith. We direct Ashgrove Equity Partners's attention in particular to Sections 3.1 through 3.5 of the Escrow Agreement for the complete claim procedures applicable to the escrow.
8. Escrow Agent Fees
We acknowledge that escrow agent fees payable to Ashgrove Equity Partners will be paid in accordance with the fee schedule attached as Exhibit B to the Escrow Agreement. As set forth in the Escrow Agreement, all escrow agent fees, including the initial acceptance fee, annual administration fees, and any extraordinary fees for services outside the scope of Ashgrove Equity Partners's standard escrow administration duties, shall be shared equally between Seller and Buyer (each bearing fifty percent (50%) of such fees), unless otherwise specified in the Escrow Agreement. Please confirm that the fee schedule attached to the Escrow Agreement is current and that no amendments or supplements to the fee schedule are required at this time.
9. Key Contact Information
For purposes of all notices, communications, and instructions under the Escrow Agreement, the primary contacts for each party are as follows:
For Seller (Genome Dx Therapeutics Inc.):
Rebecca Chiang, General Counsel Genome Dx Therapeutics Inc. 10250 Science Center Drive, Suite 600 San Diego, California 92121 Telephone: (858) 555-3100
Email: rchiang@genomedx.com
With a copy to (which shall not constitute notice):
Calderwood & Harkness LLP 555 South Hope Street, Suite 4400 Los Angeles, California 90071
Attention: James Prentice, Esq. / Tiffany Rosenthal, Esq.
Telephone: (213) 486-7200
Email: jprentice@calderwoodharkness.com / trosenthal@calderwoodharkness.com
For Buyer (Meridian Precision Diagnostics, Inc.):
David Pruitt, General Counsel Meridian Precision Diagnostics, Inc. 2400 Meridian Parkway, Suite 300 Durham, North Carolina 27713 Telephone: (919) 555-4200
Email: dpruitt@meridianprecision.com
With a copy to (which shall not constitute notice):
Whitfield Sayer & Gregg LLP 200 South Tryon Street, Suite 2800 Charlotte, North Carolina 28202
Attention: Jonathan Whitfield, Esq.
Telephone: (704) 555-8800
Email: jwhitfield@wsglegal.com
For Escrow Agent (Ashgrove Equity Partners Escrow Services, Inc.):
Samantha Koh, Vice President Ashgrove Equity Partners Escrow Services, Inc. 101 California Street, Suite 1250 San Francisco, California 94111 Telephone: (415) 555-6700
Please confirm that the foregoing contact information is correctly reflected in Ashgrove Equity Partners's records and that all notices and communications relating to the escrow will be directed to the individuals identified above.
10. Confirmation Requests
In light of the anticipated Closing Date of August 8, 2023, we respectfully request the following items in writing (email confirmation to the undersigned is acceptable) by the close of business on August 7, 2023:
1. Receipt of the enclosed fully executed Escrow Agreement (two counterpart originals);
2. Confirmed wire transfer instructions for Ashgrove Equity Partners Escrow Account No. 8841-7023-5500, including the depository bank name and ABA routing number;
3. Readiness to receive the Escrow Deposit in the amount of Fourteen Million Dollars ($14,000,000) on August 8, 2023;
4. The default investment vehicle for the escrowed funds; and
5. Whether any additional documentation, information, tax identification forms, or other materials are required by Ashgrove Equity Partners to effectuate the escrow arrangements described herein and in the Escrow Agreement.
Prompt confirmation of the foregoing items will enable us to finalize the Closing Funds Flow Memorandum and to ensure that all parties and their financial institutions are fully prepared for the Closing.
11. Closing
The closing of the OncuPath™ asset divestiture transaction is expected to occur on August 8, 2023. We greatly appreciate Ashgrove Equity Partners's cooperation and prompt attention to the matters set forth in this letter. The parties have worked diligently to bring this transaction to closing, and the timely establishment and funding of the escrow is an essential component of the closing mechanics.
Should you have any questions regarding this letter, the enclosed Escrow Agreement, or any other aspect of the escrow arrangements, please do not hesitate to contact me directly at the number and email address below. I am available throughout the day today and tomorrow to address any issues that may arise in connection with the escrow funding and the Closing.
We look forward to your prompt confirmation and to a successful closing of this transaction.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Tiffany Rosenthal Lead Associate, Mergers & Acquisitions
Direct Line: (213) 486-7248
Email: trosenthal@calderwoodharkness.com
Enclosures:
1. Escrow Agreement (two (2) fully executed counterpart originals) dated May 11, 2023, among Genome Dx Therapeutics Inc., Meridian Precision Diagnostics, Inc., and Ashgrove Equity Partners Escrow Services, Inc.
cc: (via email)
James Prentice, Esq., Calderwood & Harkness LLP Sandra Tung, Esq., Calderwood & Harkness LLP Rebecca Chiang, General Counsel, Genome Dx Therapeutics Inc. Martin Kowalski, Chief Financial Officer, Genome Dx Therapeutics Inc.
This letter and its enclosures contain information that is confidential and may be subject to the attorney-client privilege and/or the work product doctrine. If you are not the intended recipient, please notify the sender immediately and destroy all copies of this communication.
| Field | Information |
| Bank Name: | To be confirmed by Ashgrove Equity Partners — please provide the name of Ashgrove Equity Partners's designated depository bank |
| ABA Routing Number: | To be confirmed by Ashgrove Equity Partners |
| Account Name: | Ashgrove Equity Partners Escrow Services, Inc. — GDT/Meridian Escrow |
| Account Number: | 8841-7023-5500 |
| Reference: | OncuPath Asset Purchase — Escrow Deposit |