Contract analysis

I. Executive Summary The purpose of this memorandum is to provide Solstice Biomedical Devices Ltd. ("Solstice" or the "Company") with a comprehensive assessment of the full-day mediation held on March 17, 2025, before the Honorable Margaret Forsythe (Ret.) at Amberstone ADR Services, 1000 North West Street, Suite 1200, Wilmington, Delaware 19801, and to recommend a revised settlement range for Solstice's consideratio

II. Background and Procedural Posture A. The Litigation Apex Surgical Innovations, Inc. filed its Complaint on May 9, 2024, in the United States District Court for the District of Delaware, alleging that Solstice Biomedical, Inc.'s PrecisionEdge™ PE-5000, PE-12000, and PE-15000 trocar assembly product lines infringe three Apex utility patents. The case was assigned to the Honorable Richard G. Andrews. The asserted pa

1. U.S. Patent No. 9,814,237 (the "'237 Patent") — entitled "Locking Seal Assembly for Minimally Invasive Surgical Access Device." The '237 Patent was issued on November 14, 2017, and is currently set to expire on June 22, 2035. Apex asserts Claims 1, 3, 7, and 12 of the '237 Patent against the PrecisionEdge™ product lines.

2. U.S. Patent No. 10,271,884 (the "'884 Patent") — entitled "Retractable Blade Deployment Mechanism for Trocar Systems." The '884 Patent was issued on April 30, 2019, and is currently set to expire on September 15, 2036. Apex asserts Claims 1, 2, 5, 9, and 14 of the '884 Patent against the PrecisionEdge™ product lines.

3. U.S. Patent No. 10,932,105 (the "'105 Patent") — entitled "Integrated Insufflation Valve and Seal for Laparoscopic Trocar." The '105 Patent was issued on March 2, 2021, and is currently set to expire on January 10, 2038. Apex asserts Claims 1, 4, and 8 of the '105 Patent against the PrecisionEdge™ product lines. The named inventor on all three asserted patents is Dr. Raymond Szabo, Vice President of Engineering at

III. Mediation Summary A. Format and Participants A full-day mediation session was held on March 17, 2025, at the offices of Amberstone ADR Services, 1000 North West Street, Suite 1200, Wilmington, Delaware 19801. The mediation was conducted before the Honorable Margaret Forsythe (Ret.), a former judge of the Delaware Court of Chancery with extensive experience mediating patent disputes. The session commenced at appr

IV. Assessment of Litigation Strengths and Risks In formulating our revised settlement range recommendation, we have carefully assessed the strengths and risks of Solstice's litigation position across the relevant dimensions of liability, damages, and practical considerations. Our assessment is summarized below. A. Favorable Factors for Solstice The following factors weigh in Solstice's favor and support a resolution

1. Claim Construction Order. The Court's Claim Construction Order of December 6, 2024, construed five of nine disputed terms in a manner favorable to Solstice. Of particular significance are the constructions of "locking seal assembly" (as used in Claim 1 of the '237 Patent) and "retractable blade deployment mechanism" (as used in Claims 1 and 5 of the '884 Patent). The Court adopted narrow constructions of these ter

2. PE-5000 Non-Infringement Position. Building on the favorable claim constructions, Solstice has a strong non-infringement position for the PrecisionEdge™ PE-5000 Series. Dr. Calvin Ng's expert report provides a detailed, element-by-element analysis demonstrating that the PE-5000 does not practice the asserted claims under the Court's constructions. We are preparing a Motion for Summary Judgment of Non-Infringement

3. Invalidity Defense. Dr. Miriam Ostrowski's invalidity expert report identifies strong prior art references that challenge the validity of the asserted claims across all three patents. Her opinions regarding the combination of the Halvorsen PCT Application (WO 2015/064218) and the Bergström U.S. Patent No. 8,945,112 as rendering obvious the asserted claims of the '884 Patent are particularly compelling. In addition

4. Damages Limitation. Dr. Elena Marchetti's Georgia-Pacific analysis provides a well-supported basis for limiting damages to a reasonable royalty in the range of $2.8 million to $5.1 million. Her analysis properly apportions the royalty base to reflect the incremental value of the patented features, accounts for available non-infringing alternatives, and relies on genuinely comparable license agreements. By contrast

5. Gross Margin and Apportionment Arguments. Combined U.S. sales of the accused PrecisionEdge™ products from 2021 through September 30, 2024, total approximately $74.6 million at a weighted average gross margin of 61.3%. While these figures may appear to support a substantial damages award, Solstice has strong arguments that substantial non-infringing alternatives exist in the trocar market and that the patented feat

1. PE-12000 Infringement Risk. The PrecisionEdge™ PE-12000 Series presents the most significant infringement risk. The PE-12000 is accused of infringing all three asserted patents, and the four claim construction rulings favorable to Apex — particularly the broad constructions of "integrated insufflation valve" and "blade retention channel" — increase the likelihood that a jury could find infringement with respect to

2. PE-15000 Risk. The PrecisionEdge™ PE-15000 Series presents a moderate infringement risk, particularly on the '884 and '105 Patents. The PE-15000 employs a blade deployment mechanism and an insufflation valve configuration that are more similar to the structures described in the asserted patents than the PE-5000 design, though meaningful non-infringement arguments remain. The PE-15000 represents approximately 20% o

3. Jury Unpredictability. This case is set for trial before a jury in the District of Delaware. Delaware juries in patent cases can be unpredictable, and there is an inherent risk that a jury could credit Apex's technical and damages experts over Solstice's experts, particularly if Apex presents a compelling narrative around Dr. Szabo's inventive contributions and the commercial success of the PrecisionEdge™ product

4. Damages Exposure. If Apex prevails on all three patents as to the PE-12000 and PE-15000 product lines, and the jury credits Mr. Danaher's methodology, the damages exposure could range from approximately $15 million to $31.8 million. While we believe Mr. Danaher's analysis is significantly inflated and subject to challenge, we cannot guarantee that the Court will exclude his testimony or that the jury will reject h

5. Continued Litigation Costs. Estimated additional legal fees and costs to take this case through trial are approximately $1.2 million to $1.8 million. This estimate includes the costs of completing expert discovery, filing and briefing dispositive motions, preparing for and attending the pretrial conference, and the trial itself. As of March 19, 2025, approximately $2.1 million has been billed to date (the total th

6. Business Disruption. The ongoing litigation creates uncertainty for Solstice's U.S. sales operations and customer relationships. Several major hospital group purchasing organizations have inquired about the status of the litigation, and there is a risk that prolonged uncertainty could affect purchasing decisions. Additionally, the management time devoted to litigation — particularly by Eamon Rourke, Niamh Cassidy,

V. Analysis of Settlement Structure Options Based on the mediation dialogue and our assessment of the parties' respective positions, we have identified three primary structural alternatives for a potential settlement. Each is analyzed below. A. Lump-Sum Only Under this structure, Solstice would make a single, one-time payment to Apex in exchange for a license, covenant not to sue, mutual release, and dismissal with p

1. Broad License Scope. A non-exclusive, worldwide license covering not only the three asserted patents ('237, '884, and '105) but also the broader Apex Trocar Patent Family, which encompasses 14 issued patents and 6 pending applications. Apex signaled during the mediation that the scope of its covenant not to sue was negotiable at higher settlement amounts. Securing a license to the broader family would provide Sols

2. Covenant Not to Sue. A covenant not to sue for the entire Apex Trocar Patent Family in the laparoscopic surgical access device field, including a specific carve-out for future product development. This covenant should be irrevocable and should survive any change of ownership of the licensed patents.

3. Most-Favored Licensee Clause. A provision that if Apex licenses the covered patents to any third party at a lower effective royalty rate, Solstice's rate will automatically adjust downward to match. This protects Solstice from being disadvantaged relative to competitors who may negotiate licenses with Apex in the future.

4. Annual Royalty Floor and Cap. An annual royalty floor (protecting Apex's minimum revenue expectations) and an annual royalty cap (protecting Solstice's maximum exposure). We recommend negotiating a floor in the range of $400,000 to $500,000 per calendar year and a cap in the range of $1.5 million to $2.0 million per calendar year, beginning in calendar year 2026.

5. Sublicense Right. A limited right to sublicense the Licensed Patents to Solstice's contract manufacturers for the sole purpose of manufacturing the Licensed Products on Solstice's behalf. This is important given Solstice's use of third-party contract manufacturers for certain PrecisionEdge™ components.

6. Mutual Release. A mutual release of all claims and counterclaims arising out of or related to the litigation, including Solstice's counterclaims for declaratory judgment of non-infringement, invalidity, and inequitable conduct.

7. Dismissal with Prejudice. Joint stipulation of dismissal with prejudice of all claims and counterclaims.

8. Confidentiality. A robust confidentiality provision requiring that the financial terms of the settlement remain confidential and not be disclosed to any third party (other than auditors, legal and financial advisors, and as required by law or applicable stock exchange regulations).

VI. Revised Settlement Range Recommendation Based on the foregoing analysis, we recommend the following revised settlement parameters for Solstice's consideration and Board approval. A. Recommended Lump-Sum Range We recommend a lump-sum payment in the range of $7.5 million to $10 million, payable in two tranches to manage Solstice's cash flow: • First Tranche: Approximately 60% of the lump-sum amount (i.e., $4.5 mill

VII. Recommended Next Steps Based on the foregoing analysis, we recommend that Solstice take the following steps in the near term:

1. Client Discussion. We recommend scheduling a call with Dr. Fiona Tierney (CEO), Eamon Rourke (General Counsel), and Brendan Molloy (CFO) at the earliest opportunity to discuss the assessments and recommendations set forth in this memorandum. The primary objective of this discussion will be to align on the revised settlement range and to authorize preparation of the Settlement Authority Memorandum for consideration

2. Summary Judgment Motion. We recommend proceeding with the preparation and filing of the Motion for Summary Judgment of Non-Infringement as to the PE-5000 Series. We have targeted a filing date of April 1, 2025, which is within the Court's dispositive motions briefing schedule. A successful motion — or even a strong showing on the motion — would materially strengthen Solstice's negotiating position and would reduce

3. Re-Engage Mediator or Direct Negotiations. We recommend considering whether to re-engage Hon. Forsythe for a second mediation session or to proceed with direct counsel-to-counsel negotiations between Marcus Delgado and Victoria Stanton. In our judgment, direct negotiations may be more efficient at this stage, given the structural framework that emerged during the mediation and the rapport established between couns

4. Insurance Coordination. We recommend continuing coordination with Sandra Keene, Claims Manager at Halcyon Specialty Insurance Co., regarding defense cost coverage under Policy No. HSI-IP-2023-04891. We should confirm in writing that Halcyon acknowledges its continuing obligation to fund defense costs through trial (up to the remaining per-occurrence limit) and should also confirm that settlement payments and runni

5. Tax and Structuring Analysis. We recommend commissioning a tax analysis of the proposed settlement structure, including the lump-sum payment and running royalty obligations, for both Solstice Biomedical Devices Ltd. (Ireland) and Solstice Biomedical, Inc. (Delaware). Key issues to be analyzed include the deductibility of the lump-sum payment and royalty payments, withholding tax considerations under the U.S.-Irela

6. Antitrust Review. We recommend a brief review of any antitrust considerations under FTC and DOJ guidelines relating to the proposed patent license settlement terms, including the most-favored licensee clause, the field-of-use restrictions in the covenant not to sue, and the scope of the non-exclusive license. While we do not anticipate material antitrust concerns, a brief review is prudent given the scope of the p

7. Timeline. We recommend aiming to reach an agreement in principle within 60 to 90 days — i.e., by mid-May to early June 2025. This timeline would allow sufficient time to negotiate and execute the definitive settlement and license agreement, prepare and file the joint stipulation of dismissal, and complete all administrative steps well in advance of the September 30, 2025 trial date. If an agreement in principle is

VIII. Conclusion The March 17, 2025 mediation session, while not resulting in a settlement, materially advanced the dialogue between the parties and revealed a viable settlement corridor centered on a hybrid lump-sum-plus-running-royalty structure. The emergence of structural flexibility on both sides — particularly Apex's willingness to accept a reduced lump sum in exchange for an ongoing royalty stream — creates an