Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the proposed sales compensation structure for Solstice Biomedical Inc.'s United States commercial organization in connection with the planned October 1, 2024 launch of the Pulsar™ CRM System (FDA 510(k) No. K232847, Class II, Product Code MHX). Solstice has engaged Calderwood & Harkness LLP to evaluate the proposed compensation plan against the require

1. Compliance-Based Clawback Provisions. The plan should include provisions permitting Solstice Biomedical Inc. to recoup variable compensation (including accelerator earnings) paid during any period in which the employee engaged in material compliance violations.

2. Compliance Scorecard Weighting in Incentive Calculations. A defined percentage of each employee's variable compensation should be contingent on achievement of compliance-related performance metrics, scaled by seniority level (10% for territory managers, 15–20% for regional directors, 20% for area VPs, and 25% for the VP, US Commercial Operations).

3. Guardrails on Accelerator Earnings. Solstice should implement mechanisms to prevent the accelerator from creating excessive financial incentives that could drive non-compliant sales behavior, including automatic compliance audit triggers and compliance record prerequisites for accelerator eligibility.

4. Documentation of Fair Market Value Benchmarking. The compensation benchmarking analysis prepared by Meridian Consulting Group LLC should be preserved as part of the compliance program record and refreshed annually to support the ongoing reasonableness of the plan.

5. Training Requirements. All US commercial employees must complete comprehensive AKS and compliance training prior to the October 1, 2024 launch date, with annual refresher training required as a precondition for continued variable compensation eligibility. If these recommendations are implemented, the proposed plan will reflect compliance best practices consistent with the OIG's General Compliance Program Guidance

II. Background A. Solstice Biomedical Inc. — US Commercial Launch Solstice Biomedical Devices Ltd. is an Irish-headquartered medical device company with its principal offices at Unit 14, Clarion Business Park, Sandyford, Dublin D18 X4F2, Ireland. In preparation for its entry into the United States market, Solstice Biomedical Devices Ltd. formed a wholly owned US subsidiary, Solstice Biomedical Inc., which was incorpo

III. Legal Framework A. Federal Anti-Kickback Statute — Overview The federal Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b), establishes a criminal prohibition on the knowing and willful offering, paying, soliciting, or receiving of any remuneration (whether in cash or in kind, directly or indirectly, overtly or covertly) to induce or reward the referral of an individual for the furnishing of, or the orde

IV. Detailed Analysis of Proposed Compensation Plan A. Territory Manager Compensation The territory manager level represents the largest component of the US commercial organization (42 of 53 employees) and is the level at which the proposed compensation structure presents the most significant compliance considerations. Territory managers are the field-facing personnel who will interact directly with healthcare profes

1. Base Salary The proposed base salary range for territory managers is $95,000 to $115,000 per year. Placement within this range will be determined based on each candidate's experience level, geographic market, and competitive considerations at the time of hire. Solstice has benchmarked this base salary range against industry data provided by Meridian Consulting Group LLC, a management consulting firm specializing i

2. Variable Compensation (At-Plan Incentive) The proposed at-plan variable compensation for territory managers is $72,000 per year, payable quarterly based on achievement of sales quotas. This represents the variable compensation that a territory manager would earn if the territory manager achieves 100% of quota in each quarter. The variable-to-total compensation ratio is calculated as follows: • Using low-end base s

3. Quarterly Quota Structure Variable compensation for territory managers is tied to achievement of quarterly sales quotas. The proposed median quarterly quota per territory manager is: • 18 implantable monitor units at $4,950 per unit = $89,100 • 18 remote telemetry transmitters at $1,200 per unit = $21,600 • Total median quarterly quota: $89,100 + $21,600 = $110,700 per quarter per territory manager • Annualized me

4. Accelerator Multiplier The proposed compensation plan includes a 2.0x accelerator multiplier applicable to quarterly sales exceeding 120% of quota. Under this structure, a territory manager who exceeds 120% of the quarterly quota earns commission at twice the standard commission rate on all incremental sales above the 120% threshold. The accelerator threshold is calculated as follows: • 120% of median quarterly qu

V. Employee Safe Harbor Eligibility Confirmation Having described the legal framework and analyzed the specific components of the proposed compensation plan, we now turn to the threshold question of whether the plan qualifies for protection under the AKS employee safe harbor at 42 C.F.R. § 1001.952(i). Employment Classification. All fifty-three (53) planned US commercial employees — including the forty-two territory

VI. Risk Assessment and Benchmarking A. Variable Compensation Ratio Benchmarking To assess the compliance risk profile of the proposed compensation plan in context, we reviewed industry benchmarking data sourced via the Meridian Consulting Group LLC analysis prepared by Dr. Lena Voss and James Cho. The benchmarking data surveyed compensation structures across the medical device industry, with specific focus on the CR

VII. Recommendations Based on the analysis set forth in this memorandum, we recommend the following seven categories of compliance measures for incorporation into the Solstice Biomedical Inc. US sales compensation plan prior to the October 1, 2024 launch date. These recommendations are designed to mitigate the compliance risks identified in the preceding sections while preserving the commercial competitiveness of the