Contract analysis

From: Marcus Delgado <mdelgado@calderwoodharkness.com> To: Eamon Rourke <erourke@solsticebiomed.com>, Brendan Molloy <bmolloy@solsticebiomed.com> Cc: Catherine Bloom <cbloom@calderwoodharkness.com>, Christy Bauer <cbauer@calderwoodharkness.com>, Peter Vassiliev <pvassiliev@calderwoodharkness.com> Date: Wed, 04 Jun 2025 04:50:00 -0000 Subject: RE: Apex Settlement Negotiations — Terms Agreed in Principle [PRIVILEGED]

I am pleased to report that I spoke with Victoria Stanton at Hargrove, Tate & Bennington this afternoon and we have reached agreement in principle on all principal settlement terms. This is an excellent result for Solstice, and I want to lay out the full picture so we are all aligned as we move into documentation.

1. **Lump-Sum Payment:** $8,750,000, payable in two tranches: - Tranche 1: $5,250,000, due within 10 business days of execution of the definitive settlement agreement (effectively by June 30, 2025, assuming execution on or around June 16). - Tranche 2: $3,500,000, due on or before September 15, 2025.

2. **Escrow:** Both tranche payments will be deposited into escrow at Tidewater Fiduciary Services, Inc. (I have identified Jennifer Hsu, VP Escrow Services, as our contact there) and released to Apex within 3 business days of deposit. Victoria has confirmed Apex is comfortable with this structure.

3. **Running Royalty:** 3.75% of Net Sales of Licensed Products, defined as the PrecisionEdge PE-5000, PE-12000, and PE-15000 series and successor products.

4. **Net Sales Definition:** Gross invoiced sales less returns, rebates, chargebacks, freight, and sales taxes. This is consistent with standard industry definitions and tracks the definition used in Apex's own prior license agreements.

5. **Royalty Floor:** $500,000 per calendar year, beginning calendar year 2026.

6. **Royalty Cap:** $1,800,000 per calendar year.

7. **License Grant:** Non-exclusive, non-transferable (except in connection with a change of control of Solstice Biomedical Devices Ltd. or Solstice Biomedical, Inc.), worldwide, under the '237, '884, and '105 Patents and any continuations, divisionals, or reissues thereof. Field of use: laparoscopic surgical access devices. Limited sublicense rights for contract manufacturers of Licensed Products.

8. **Covenant Not to Sue:** Apex will covenant not to assert any patent in the Apex Trocar Patent Family (all 14 issued patents and 6 pending applications) against Solstice, its subsidiaries, or their customers in the licensed field for the duration of the license term.

9. **Most-Favored Licensee:** Agreed. If Apex enters into a license with any third party under the licensed patents at a running royalty rate lower than 3.75%, Solstice's rate will adjust prospectively to match the lower rate. Victoria and I agreed to memorialize the notification protocol in a side letter to the definitive agreement.

10. **Audit Right:** Apex will have an annual audit right over Solstice's royalty records, conducted at Apex's sole expense. However, if an audit reveals an underpayment exceeding 5% of amounts due for the audited period, Solstice will bear the cost of the audit. This is a standard provision and consistent with the Board's instructions.

11. **Mutual Release:** Full mutual release of all claims, counterclaims, and defenses asserted or that could have been asserted in *Apex Surgical Technologies, Inc. v. Solstice Biomedical, Inc.*, Case No. 1:24-cv-00587-RGA (D. Del.).

12. **Dismissal:** Stipulation of Dismissal with Prejudice, each party bearing its own costs and attorneys' fees.

13. **Confidentiality:** All settlement terms will be treated as confidential. The parties will issue a joint public statement limited to agreed language along the lines of "the matter has been resolved on mutually agreeable terms." No financial terms will be disclosed.

- **Term Sheet:** C&H will prepare and circulate a binding Term Sheet reflecting the above terms for execution by both parties. Our target is execution by **June 10, 2025**.

- **Definitive Documentation:** Following Term Sheet execution, we will prepare the first draft of the Definitive Settlement Agreement and all exhibits, including: (a) the patent license agreement; (b) the covenant not to sue; (c) the schedule of licensed patents and pending applications; (d) the form of quarterly royalty report; (e) the stipulation of dismissal with prejudice; and (f) the agreed form of joint public

- **Court Notification:** Upon execution of the Term Sheet, C&H will file a letter to the Honorable Judge Richard G. Andrews and Magistrate Judge Pratt notifying the Court that the parties have reached a settlement in principle and requesting that the September 30, 2025 trial date and all remaining pre-trial deadlines be vacated.

- **Insurance Notification:** C&H will send a settlement reporting letter to Sandra Keene at Halcyon Specialty Insurance Co. (Policy HSI-IP-2023-04891) notifying of the resolution. As previously discussed, the policy covers defense costs only and not settlement payments, but timely notification is required under the policy terms.

- **Tax and Antitrust Memoranda:** Peter — please prepare (i) the memorandum on U.S. and Irish tax implications of the lump-sum and royalty payments, addressing withholding tax obligations under the U.S.–Ireland income tax treaty and the payment flow through Solstice Biomedical, Inc. (EIN 84-3291056), and (ii) a brief antitrust considerations memorandum regarding the license structure. Eamon, this will also assist Ni

I want to underscore that this is a very favorable outcome for Solstice. The $8.75M lump-sum, combined with running royalties capped at $1.8M per year, represents a small fraction of the $31.8M in damages that Apex was claiming through Hugh Danaher's report. Even under conservative assumptions, Solstice's total settlement cost over the life of the patents is likely to fall in the range of $18–22M — well below the lit

Thank you all for the tireless effort throughout this litigation — from both sides of the Atlantic. I look forward to getting the documentation finalized and putting this matter to rest.

Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY WORK PRODUCT. This communication is protected by the attorney-client privilege and/or the work product doctrine. Do not forward or distribute without authorization.

From: Eamon Rourke To: Marcus Delgado Cc: Brendan Molloy , Catherine Bloom , Christy Bauer Date: Tuesday, June 3, 2025, 10:15 AM EDT Subject: RE: Apex Settlement Negotiations — Progress Update After Friday Call [PRIVILEGED]

Good news. I briefed Dr. Tierney and the Board last evening (Dublin time) and they have reviewed your recommendation and the Risk Assessment Memorandum in detail. The Board approves the proposed terms as follows:

- **Lump-sum:** $8,750,000, structured as two tranches — Tranche 1 of $5,250,000 and Tranche 2 of $3,500,000, with Tranche 2 payable on or before September 15, 2025. - **Running royalty:** 3.75% of Net Sales, with a $500,000 annual floor and $1,800,000 annual cap. - **All other terms** as outlined in your email of June 2 — non-exclusive worldwide license, full patent family covenant, mutual release, dismissal with pr

A few additional points from the Board discussion:

1. **Most-Favored Licensee:** The Board considers this provision important and would like the team to insist on it. Given the competitive dynamics in the trocar market — particularly with Meridian Surgical and Lakepoint Medical both potentially in Apex's licensing crosshairs — the Board wants assurance that Solstice is not paying a premium relative to competitors. Please make clear to Victoria that this is a firm req

2. **Escrow:** The Board prefers that all lump-sum payments pass through an independent escrow agent rather than direct wire transfers to Apex. We agree with your suggestion of Tidewater Fiduciary Services — please proceed with establishing that relationship.

3. **Audit Rights:** We understand Apex will likely insist on an audit right over Solstice's royalty payment records. We are fine with an annual audit conducted at Apex's expense, with Solstice bearing the audit cost only if a discrepancy exceeding 5% of the amounts due for the audited period is identified. This is a standard provision and we see no reason to resist it.

4. **Joint Public Statement:** The Board is firm that any public statement be limited to words along the lines of "the matter has been resolved on mutually agreeable terms." Absolutely no disclosure of financial terms, royalty rates, or other specifics. Fiona is particularly sensitive to this given analyst coverage ahead of the Q3 earnings call.

5. **Governing Law:** Delaware is acceptable.

On the **tax memorandum** — I want to reiterate this request. Niamh Cassidy is coordinating with Glenmore & Byrne on the Irish side, but we need C&H's analysis of U.S. withholding tax implications and the optimal payment flow structure between Apex, the escrow agent, Solstice Biomedical, Inc. (the Delaware subsidiary), and Solstice Biomedical Devices Ltd. (the Irish parent). Please prioritize this alongside the Term

Let's get this wrapped up. The team in Dublin is eager to put this behind us and focus on the next-generation product launch.

Eamon Rourke General Counsel Solstice Biomedical Devices Ltd. Sandyford Business District Dublin D18 Y2X7, Ireland Tel: +353 1 555 8200 erourke@solsticebiomed.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY WORK PRODUCT. This communication is protected by the attorney-client privilege and/or the work product doctrine. Do not forward or distribute without authorization.

From: Marcus Delgado To: Eamon Rourke , Brendan Molloy Cc: Catherine Bloom , Christy Bauer , Peter Vassiliev Date: Monday, June 2, 2025, 3:22 PM EDT Subject: RE: Apex Settlement Negotiations — Progress Update After Friday Call [PRIVILEGED]

Wanted to give you a prompt update following my call with Victoria Stanton on Friday, May 30. We had a substantive and productive discussion, and the gap between the parties has narrowed considerably. Here is a summary of where things stand on each key term:

**Lump-Sum:** Apex moved down to $9.5M (from their counterproposal of $11.2M). I countered at $8.5M. Victoria indicated that Apex would likely settle in the $8.5–9.0M range provided the royalty terms are acceptable. I believe we can land this at **$8.75M** as a split-the-difference resolution.

**Running Royalty:** We discussed the range of 3.5–4.0%. I pushed for 3.75% as a natural midpoint, and Victoria indicated that number could work for Apex if the lump-sum lands at $8.75M or above. This is within the Board's authorized range of up to 4.0%.

**Field of Use:** Victoria conceded that "laparoscopic surgical access devices" is an acceptable field of use, dropping Apex's prior insistence on the narrower "laparoscopic trocar assemblies" limitation. This is a significant win — it ensures the PrecisionEdge line and any future evolution of Solstice's product portfolio in the surgical access space are covered.

**Covenant Not to Sue:** Apex is now willing to provide a covenant not to sue covering the full Apex Trocar Patent Family for products in the licensed field. This was one of the Board's highest priorities, and we achieved it. Solstice will have freedom to operate under all 14 issued patents and 6 pending applications without risk of future assertion.

**Sublicense Rights:** Apex is willing to permit sublicenses limited to contract manufacturers of Licensed Products. This addresses Solstice's operational need given the PE-15000 manufacturing arrangements.

**Most-Favored Licensee:** Victoria said Apex would consider this but needs to discuss further with Dr. Chandrasekaran. I made clear this is an important term for Solstice and we will be pressing for it in the next round.

**Tranche Structure:** Apex is willing to accept two tranches provided Tranche 1 is at least 60% of the total and Tranche 2 is paid within 90 days. This aligns with Brendan's preference.

**Royalty Cap/Floor:** Victoria expressed general willingness to discuss a cap and floor mechanism. She asked that we propose specific numbers. I have not yet shared our target figures ($500K floor / $1.8M cap) and will hold those for the formal counter-counterproposal.

Based on the trajectory of negotiations and the remaining gap, I recommend the following as Solstice's final position:

- Lump-sum: **$8,750,000** (60/40 split — Tranche 1 of $5,250,000 due within 10 business days of execution; Tranche 2 of $3,500,000 due on or before September 15, 2025). - Running royalty: **3.75% of Net Sales**. - Royalty floor: **$500,000 per calendar year**, beginning CY 2026. - Royalty cap: **$1,800,000 per calendar year**. - Insist on the most-favored licensee clause. - All other terms as previously discussed: n

I believe Victoria will recommend acceptance of these terms to Martin Hale and Dr. Chandrasekaran. The overall package represents a meaningful discount to Apex's litigation risk exposure and provides them with a guaranteed revenue stream through 2038.

I am circulating separately a **Risk Assessment Memorandum (Trial vs. Settlement)** to Dr. Tierney, Eamon, and Brendan, which compares these proposed settlement terms against the costs, risks, and potential outcomes of proceeding to the September 30 trial. The memorandum considers (among other factors) trial outcome probabilities, the post-Markman claim construction landscape, the strength of Dr. Marchetti's damages

**Eamon** — I need you to confirm final Board authority on the $8.75M lump-sum and 3.75% royalty rate so I can finalize terms with Victoria this week. If the Board is aligned, our target is execution of a binding Term Sheet by **June 10**.

Please let me know your availability for a call tomorrow morning if there are any questions.

Marcus Delgado Partner Calderwood & Harkness LLP 1200 Market Street, Suite 3400 Wilmington, DE 19801 Tel: (302) 555-4100 mdelgado@calderwoodharkness.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY WORK PRODUCT. This communication is protected by the attorney-client privilege and/or the work product doctrine. Do not forward or distribute without authorization.

From: Brendan Molloy To: Marcus Delgado , Eamon Rourke Cc: Catherine Bloom , Christy Bauer Date: Thursday, May 29, 2025, 8:03 AM EDT Subject: RE: Apex Settlement Negotiations — Counterproposal Received [PRIVILEGED]

I've run the numbers on Apex's counterproposal overnight and wanted to share my analysis before our call this morning.

At $11.2M lump-sum plus 4.75% running royalty on estimated Year 1 Net Sales of $24.2M, the annual royalty burden would be approximately $1,149,500 in Year 1. Projecting forward over the remaining 13-year life of the '105 Patent (expiring 2038) and assuming modest annual growth of 6–8% in U.S. PrecisionEdge Net Sales, cumulative running royalties over the patent life could reach $18–22M. Combined with the $11.2M lump-

**Solstice's Proposed Counter at $8.5M + 3.5%:**

At $8.5M lump-sum plus 3.5% running royalty, Year 1 running royalty would be approximately $847,000. With a royalty cap of $1.8M per year, total running royalties over the 13-year patent life would be capped at approximately **$23.4M** absolute maximum. Combined with the $8.5M lump-sum, the absolute ceiling is roughly $31.9M — but under realistic growth assumptions, the actual total is more likely in the **$18–22M**