Contract analysis

I. Executive Summary The purpose of this memorandum is to present a comprehensive comparison of the risks, costs, and strategic considerations attendant to proceeding to trial versus accepting the settlement terms currently under negotiation with Apex Surgical Innovations, Inc. ("Apex") in the above-captioned patent infringement action. Trial is currently scheduled to commence on September 30, 2025, before Chief Judg

II. Background and Procedural Posture A. The Litigation Apex Surgical Innovations, Inc. ("Apex"), a Delaware corporation headquartered in Malvern, Pennsylvania, filed its Complaint for Patent Infringement against Solstice Biomedical, Inc. ("Solstice US"), Solstice's wholly-owned U.S. operating subsidiary, on May 9, 2024. The Complaint, as subsequently amended, asserts infringement of three United States utility paten

III. Settlement Terms Under Negotiation The following summarizes the material terms of the settlement currently under negotiation between Solstice and Apex. These terms are reflected in the most recent draft of the Definitive Settlement Agreement circulated by Apex's counsel (Hargrove, Callister & Phelps LLP) on May 29, 2025, as modified by C&H's markup returned on May 31, 2025. We expect that any remaining open poin

IV. Trial Risk Analysis A. Claim-by-Claim Infringement Risk Assessment The infringement risk varies significantly across the three accused product lines and the asserted patents. We have assessed the likelihood of a finding of infringement at trial for each product line, taking into account the Court's Claim Construction Order, the expert reports, the summary judgment rulings, and our assessment of how the evidence i

1. PE-5000 Series (5 mm Trocar) — Accused Under the '237 and '884 Patents The PE-5000 Series presents the lowest infringement risk among the three accused product lines. Our assessment of the likelihood of an infringement finding at trial for this product is approximately 30–35%. Key Strengths for Solstice. The PE-5000 utilizes a fundamentally different seal retention mechanism than the structure described and claime

2. PE-12000 Series (12 mm Trocar) — Accused Under All Three Patents The PE-12000 Series presents the highest infringement risk and is the most consequential product line from both a liability and a financial standpoint. Our assessment of the likelihood of a finding of infringement on at least some asserted claims is approximately 55–65%. Key Vulnerabilities. The Court's construction of "integrated insufflation valve"

3. PE-15000 Series (15 mm Trocar) — Accused Under the '884 and '105 Patents The PE-15000 Series presents a moderate infringement risk. Our assessment of the likelihood of an infringement finding is approximately 40–50%. The PE-15000 shares the same blade deployment mechanism platform as the PE-12000, creating similar exposure under the '884 Patent. The analysis of the '884 Patent infringement risk discussed above app

1. Apex's Damages Theory Hugh Danaher, CFA, of Keystone Valuation Advisors LLC has submitted an expert report claiming $31,800,000 in reasonable royalty damages under 35 U.S.C. § 284. Mr. Danaher's analysis is based on a royalty rate of approximately 12–15% applied to the combined U.S. sales of the accused products (royalty base of $74.6 million in sales from CY 2021 through September 30, 2024, plus projected sales t

2. Solstice's Damages Rebuttal Dr. Elena Marchetti of Pinnacle Economics Group LLC has submitted a comprehensive rebuttal to Mr. Danaher's damages analysis. Dr. Marchetti identifies several significant methodological flaws in Mr. Danaher's report: • Inflated Royalty Base. Mr. Danaher fails to properly apportion the royalty base to account for the non-patented components and features of the accused products. The Preci

3. Damages Range Scenarios Based on the foregoing analyses, we have modeled the following damages range scenarios: The "worst case" scenario reflects our assessment that, even if infringement is found on all product lines, the Court is likely to exclude or limit portions of Mr. Danaher's testimony through Daubert challenges and that the jury is unlikely to adopt his analysis in full. We anticipate that a realistic wo

4. Potential for Enhanced Damages and Attorneys' Fees Under 35 U.S.C. § 284, the Court has discretion to award up to treble damages for willful infringement. Apex has alleged willfulness in its Complaint, contending that Solstice had knowledge of the asserted patents and continued to sell the accused products after receiving notice. Solstice has a strong good-faith defense to the willfulness allegation. Prior to the

5. Injunctive Relief Risk If Apex prevails on infringement and the asserted patents are found valid, Apex will almost certainly seek a permanent injunction under 35 U.S.C. § 283. The post-Northgate Group v. MercExchange, L.L.C., 547 U.S. 388 (2006), four-factor test requires the patent holder to demonstrate: (1) irreparable injury; (2) inadequacy of legal remedies (i.e., money damages); (3) a balance of hardships fav

V. Cost-to-Complete Analysis: Trial Scenario In order to provide a complete comparison of the settlement and trial paths, we have prepared a detailed estimate of the additional costs that would be incurred if the matter proceeds to trial. A. Legal Fees — Calderwood & Harkness LLP As of June 1, 2025, C&H has billed a total of $2,847,319.42 in fees and costs in this matter, comprised of $2,611,480.00 in attorney fees a

VI. Comparative Financial Analysis: Settlement vs. Trial A. Settlement Cost Structure The total estimated cost of the settlement, expressed in net present value terms, is as follows: Upfront Lump-Sum Cost: $8,750,000. This amount is payable in two tranches as described in Section III.A above. The full $8,750,000 is borne by Solstice from operating cash; it is not covered by insurance. Brendan Molloy (CFO) has confirm